1 contents
Notice of Annual General Meeting 2
Statement Accompanying Notice of Annual General Meeting 3 2002 BERHAD • ANNUAL REPORT EON CAPITAL
Five-Year Financial Highlights 4
Corporate Information 6
Profile of The Directors 7
Group Structure 10
Group Operational Structure 11
Board and Management Committees 12
Group Management 13
Chairman’s Statement 14
Review of Operations 17
Statement on Corporate Governance 26
Additional Compliance Information 31
Statement of Directors’ Responsibility for Preparing the Financial Statements 32
Audit Committee Report 33
Statement of Internal Control 36
Risk Management Framework 38
Calendar of Significant Events and Activities 39
Analysis of Shareholdings 40
List of Properties Held by The Group 44
Group Corporate Directory 48
Reports and Financial Statements 59
Proxy Form 2 notice of annual general meeting
NOTICE IS HEREBY GIVEN THAT the Fifth Annual General Meeting of EON CAPITAL BERHAD will be held at Nirwana Ballroom 1, Lower Lobby, Mutiara Hotel, Jalan Sultan Ismail, 50718 Kuala Lumpur on Monday, 26 May 2003 at 12.00 noon for the following purposes:
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL ORDINARY BUSINESS
1. To receive and adopt the Reports of the Directors and Auditors and the Audited Financial Statements for the year ended 31 December 2002. RESOLUTION 1
2. To re-elect the following Directors pursuant to Article 102 of the Company’s Articles of Association:
a. Y. Bhg. Tan Sri Dato’ Seri Mohd Saleh bin Sulong RESOLUTION 2
b. Y. Bhg. Datin Dr. Umikalsum binti Mohd Noh RESOLUTION 3
c. Mr. Rin Kei Mei RESOLUTION 4
d. Y. Bhg. Dato’ Maznah binti Abdul Jalil RESOLUTION 5
e. Dr. Tiong Ik King RESOLUTION 6
f. Mr. Wizayaratnam Somasundram RESOLUTION 7
3. To re-appoint Messrs. PricewaterhouseCoopers as Auditors and to authorise the Directors to fix their remuneration. RESOLUTION 8
4. To transact any other ordinary business of the Company for which due notice has been given.
By Order of the Board.
LEE CHEAU PENG (MAICSA 7005134) Company Secretary
Kuala Lumpur 3 May 2003
Note i A member entitled to attend the meeting may appoint a proxy who may but need not be a member of the Company. The provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.
Note ii The instrument appointing a proxy must be deposited at the Registered Office of the Company at 12th Floor, Wisma Cyclecarri, 288, Jalan Raja Laut, 50350 Kuala Lumpur not less than 48 hours before the time appointed for holding the meeting.
Note iii If the member is a corporation, the proxy form should be executed under its Common Seal or under the hand of an officer or attorney duly authorised. statement accompanying 3 notice of annual general meeting
Pursuant to paragraph 8.28 of the Listing Requirements of the Kuala Lumpur Stock Exchange.
1. Name of Directors who are standing for re-election Under Article 102 of the Company’s Articles of Association
i. Y.Bhg. Tan Sri Dato’ Seri Mohd Saleh bin Sulong ii. Y.Bhg. Datin Dr. Umikalsum binti Mohd Noh iii. Mr. Rin Kei Mei EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL iv. Y.Bhg. Dato’ Maznah binti Abdul Jalil v. Dr. Tiong Ik King vi. Mr. Wizayaratnam Somasundram
2. Details of Attendance of Directors at Board Meetings Three board meetings were held following the completion of the corporate exercise which led to the listing of the Company on 23 December 2002. Attendance of the Directors is shown below :-
No. Directors Attendance
1. Y. Bhg. Tan Sri Dato’ Seri Mohd Saleh bin Sulong 3 out of 3 meetings 2. Y. Bhg. Datin Dr. Umikalsum binti Mohd Noh 3 out of 3 meetings 3. Mr. Rin Kei Mei 2 out of 3 meetings 4. Y. Bhg. Dato’ Maznah binti Abdul Jalil 3 out of 3 meetings 5. Dr. Tiong Ik King 3 out of 3 meetings 6. Mr. Wizayaratnam Somasundram 3 out of 3 meetings
3. Date, time and place of Board Meetings
No. Type of Meeting Date Time Place
1. 1st Board of Directors Wednesday, 12.35 p.m. Board Room Meeting for 2003 22 January 2003 EON Capital Berhad 12th Floor, Wisma Cyclecarri 288, Jalan Raja Laut 50350 Kuala Lumpur
2. EON Capital Special Board Monday, 12.50 p.m. The Mauna Lani A of Directors Meeting 24 February 2003 Pan Pacific Glenmarie 1, Jalan Usahawan U 1/8 Seksyen U1 40250 Shah Alam Selangor
3. 2nd Board of Directors Wednesday, 3.30 p.m. Board Room Meeting for 2003 23 April 2003 EON Capital Berhad 12th Floor, Wisma Cyclecarri 288, Jalan Raja Laut 50350 Kuala Lumpur
4. The details of Directors who are standing for re-election are presented on page 7 to 9 of the Annual Report. 4 five-year financial highlights
FINANCIAL PERFORMANCE The consolidated results of EON Capital Berhad incorporates the one month consolidated results of EON Bank Berhad and its subsidiary companies. EON Bank Berhad became a wholly-owned subsidiary company of EON Capital Berhad on 2 December 2002, pursuant to the EBB Scheme of Arrangement and Amalgamation between EBB and its shareholders under Section 176 of the Companies Act, 1965.
EON Capital Berhad was previously a dormant company and commenced its operations as an investment holding
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL company upon the acquisition of EON Bank Berhad and its subsidiary companies on 2 December 2002. The five- year financial highlights of EON Bank Group is provided below to reflect the underlying business of the Group. For illustrative purposes, we have appended below the proforma results for 2002 to show the effects on the consolidated results of EON Capital Berhad had the EBB Scheme of Arrangement and Amalgamation been completed on 1 January 2002.
EON Capital Berhad EON Bank Group Proforma Amount in RM Millions 1998 1999 2000 2001 2002 2002
INCOME
Operating Income Before Loan Loss and Provision 168 337 412 549 562 565
Profit (Loss) Before Taxation ( 22 ) 209 319 328 390 393
Profit (Loss) After Taxation ( 35 ) 200 261 201 251 254
Actual
BALANCE SHEET
Total Assets 12,890 13,597 17,792 24,721 30,876 30,573
Net Loans and Advances 8,589 9,349 11,659 17,388 20,574 20,574
Total Deposits 10,885 11,793 14,854 20,025 25,823 25,786
Shareholders’ Funds 1,241 1,442 1,775 2,075 2,405 1,850
Net Tangible Assets Backing (RM) 1.1 1.3 1.4 1.4 1.6 2.67
Proforma
FINANCIAL RATIOS
Earnings per share (sen) - basic ( 3.1 ) 17.9 23.2 16.7 19.6 36.7
Return on Shareholders’ Funds (%) ( 2.8 ) 13.9 14.7 9.7 10.5 13.7
Risk Weighted Capital Ratio (%) (EON Bank Berhad) 15.3 15.8 11.7 12.5 11.8 N/A
Net Non Performing Loan Ratio (%) 4.2 5.1 5.2 5.7 4.9 N/A 5
PROFIT BEFORE TAXATION NET LOANS AND ADVANCES ( RM Million ) ( RM Million )
390 EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL 328 319 20,574
17,388
209
11,659
9,349 8,589
(22)
98 99 00 01 02 98 99 00 01 02
TOTAL ASSETS SHAREHOLDERS' FUNDS ( RM Million ) ( RM Million )
2,405
30,876
2,075
24,721 1,775
1,442
17,792 1,241
13,597 12,890
98 99 00 01 02 98 99 00 01 02 6 corporate information
BOARD OF DIRECTORS
Chairman • Y. Bhg. Tan Sri Dato’ Seri Mohd Saleh bin Sulong
Deputy Chairman • Y. Bhg. Datin Dr. Umikalsum binti Mohd Noh
Members • Mr. Rin Kei Mei EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL • Y. Bhg. Dato’ Maznah binti Abdul Jalil • Dr. Tiong Ik King • Mr. Wizayaratnam Somasundram
COMPANY SECRETARY
• Lee Cheau Peng (MAICSA 7005134)
REGISTERED OFFICE
12th Floor, Wisma Cyclecarri, 288 Jalan Raja Laut, 50350 Kuala Lumpur Telephone : 03-2694 1188 Facsimile : 03-2692 1851 Website : www.eonbank.com.my
SHARE REGISTRAR
Panama Resources Sdn. Bhd. No. 23, Jalan Sri Hartamas 7, Sri Hartamas, 50480 Kuala Lumpur Telephone : 03-6201 1120 Facsimile : 03-6201 3121
AUDITORS
PricewaterhouseCoopers 11th Floor, Wisma Sime Darby, Jalan Raja Laut, P.O. Box 10192, 50706 Kuala Lumpur
PRINCIPAL BANKER
• EON Bank Berhad
SOLICITOR
• Nik Saghir & Ismail
STOCK EXCHANGE LISTING
• The Main Board, Kuala Lumpur Stock Exchange (23 December 2002) profile of the directors 7
Y. Bhg. Tan Sri Dato’ Seri Mohd Saleh bin Sulong Y. Bhg. Tan Sri Dato’ Seri Mohd Saleh bin Sulong, Malaysian, aged 51, was appointed as Chairman, Non-Independent Non-Executive Director of EON Capital Berhad on 23 December 2002. He is the Chairman of the Nominating Committee and Group Remuneration Committee and a member of the Audit Committee. Tan Sri is the Group Chairman of DRB-HICOM Berhad. His other directorship of public companies include Eastern Pacific Industrial Corporation Berhad, Edaran Otomobil Nasional Berhad, EON Bank Berhad, EON Finance Berhad, 2002 BERHAD • ANNUAL REPORT EON CAPITAL Gadek (Malaysia) Berhad, HICOM Holdings Berhad, and Horsedale Development Berhad. Tan Sri is a member of the Chartered Institute of Management Accountant, U.K., and worked as an accountant in Cycle & Carriage Bintang Berhad, Cycle & Carriage (M) Sdn Bhd and United Cycle Sdn Bhd for 10 years before his appointment as Executive Director of the Master-Carriage Group of Companies in 1984. Tan Sri has no direct holding of securities in the Company. He has indirect holdings of 347,270,469 (50.10%) in the Company by virtue of his deemed interest of 31.53% in Edaran Otomobil Nasional Berhad. Tan Sri has no family relationship with any Directors and/or major shareholders of the Company and has no conflict of interest with the Company. He has no convictions for offences within the past 10 years. Tan Sri attended all the three Board Meetings held since the listing of the Company on 23 December 2002.
Y. Bhg. Datin Dr. Umikalsum binti Mohd Noh Y. Bhg. Datin Dr. Umikalsum binti Mohd Noh, Malaysian, aged 56, was appointed as Deputy Chairman, Independent Non-Executive Director of EON Capital Berhad on 17 December 2002. She is the Chairman of the Audit Committee and a member of the Nominating Committee and Group Remuneration Committee. She graduated with a degree in Bachelor of Economics (Hons) from the University of Malaya, and post-graduated with a Master of Arts (Public Policy & Administration) from the University of Wisconsin, U.S.A., and her doctorate in Ph. D (Economics - Public Finance) from the University of Malaya. She was Assistant Director of Budget in Ministry of Finance (Budget Division), and was seconded to Malaysian Highway Authority as Director of Finance. She was the Deputy Secretary in Ministry of Finance (Supply & Contract Division), and in Ministry of Finance (Tax Division). While working for her Ph. D. (University of Malaya) she was attached to the Centre for Research on Federal Financial Relations, Australian National University. She was Head of Business Development Division, and subsequently was appointed as Managing Director of Kinta Kellas PLC. She is also a Director of EON Bank Berhad, EON Finance Berhad and Malaysian International Merchant Bankers Berhad. She is also a member of the Board of Inland Revenue Board. She has a direct holding of 79,006 ordinary shares in the Company. She has no family relationship with any Directors and/or major shareholders of the Company and has no conflict of interest with the Company. She has no convictions for offences within the past 10 years. She attended all the three Board Meetings held since the listing of the Company on 23 December 2002. 8 profile of the directors { continued }
Mr. Rin Kei Mei Mr. Rin Kei Mei, Singaporean, aged 68, was appointed as Non-Independent Non-Executive Director of EON Capital Berhad on 23 December 2002.
Mr. Rin graduated with a degree in Chemical Engineering (University of Cheng Kung), Taiwan. He is a Company Director. His directorship in other public companies are Edaran Otomobil Nasional Berhad, EON Bank Berhad, and EON
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Finance Berhad. Previously he was Joint Managing Director of Perusahaan Sadur Timah (Malaysia) (PERSTIMA) Sdn. Bhd. and Managing Director of Kedah Cement Holdings Bhd.
He has a direct holding of 39,550 ordinary shares in the Company, and indirect holding of 2,073,817 (0.3%) (deemed interested by virtue of his substantial interest of 99.99% in Lintang Emas Sdn Bhd).
Mr. Rin has no family relationship with any Directors and/or major shareholders of the Company and has no conflict of interest with the Company. He has no convictions for offences within the past 10 years.
Mr. Rin attended two out of the three Board Meetings held since the listing of the Company on 23 December 2002.
Y. Bhg. Dato’ Maznah binti Abdul Jalil Y. Bhg. Dato’ Maznah binti Abdul Jalil, Malaysian, aged 49, was appointed as Non-Independent Non-Executive Director of EON Capital Berhad on 23 December 2002. She is a member of the Group Remuneration Committee.
Dato’ Maznah graduated with a Bachelor of Science and Masters degree in Business Administration (Finance) from Northern Illinois University, U.S.A. and Central Michigan University, U.S.A. respectively.
Dato’ Maznah is an Executive Director of DRB-HICOM Berhad and Senior Group Director, Corporate Finance & Advisory of DRB-HICOM. She is a Chairman of EON CMG Life Assurance Berhad, and a Director of Eastern Pacific Industrial Corporation Berhad, EON Bank Berhad, EON Finance Berhad, Gadek (Malaysia) Berhad, Golden Pharos Berhad, HICOM Holdings Berhad, Horsedale Development Berhad, Labuan Reinsurance (L) Ltd, Malaysian International Merchant Bankers Berhad, South East Asia Insurance Berhad and several private limited companies under DRB-HICOM. She is a member of the Board of University Technology Mara and a Trustee (Treasurer) of Malaysian Aids Foundation.
Prior to joining DRB-HICOM, she was with a local merchant bank with exposure in varied corporate advisory assignments. In 1992, she joined Master-Carriage (Malaysia) Sdn Bhd as Director, Corporate Affairs.
She has no direct or indirect securities holding in the Company and its subsidiaries. She has no family relationship with any Directors and/or major shareholders of the Company and has no conflict of interest with the Company. She has no convictions for offences within the past 10 years.
Dato’ Maznah attended all the three Board Meetings held since the listing of the Company on 23 December 2002. 9
Dr. Tiong Ik King
Dr. Tiong Ik King, Malaysian, aged 52, was appointed as Non-Independent Non-Executive Director of EON Capital Berhad on 17 December 2002.
Dr. Tiong graduated with a medical degree in MBBS, Singapore (National University of Singapore) and is also member of MRCP, UK (Royal College of
Physicians, United Kingdom). 2002 BERHAD • ANNUAL REPORT EON CAPITAL
Dr. Tiong is a Director of Jaya Tiasa Holdings Berhad. He was also Director of EON Bank Berhad and EON Finance Berhad until 24 February 2003.
Dr. Tiong has a direct holding of 43 ordinary shares in the Company. In addition, he has an indirect holding of 119,567,580 (17.25%) in the Company by virtue of his direct and indirect interest in R.H. Development Corporation Sdn. Bhd., and Tiong Toh Siong Holdings Sdn. Bhd.
Dr. Tiong has no family relationship with any Directors and/or major shareholders of the Company and has no conflict of interest with the Company. He has no convictions for offences within the past 10 years.
Dr. Tiong attended all the three Board Meetings held since the listing of the Company on 23 December 2002.
Mr. Wizayaratnam Somasundram
Mr. Wizayaratnam Somasundram, Malaysian, aged 63, was appointed as Independent Non-Executive Director of EON Capital Berhad on 17 December 2002. He is a member of the Audit Committee and Nominating Committee.
Mr. Somasundram graduated with a degree in Bachelor of Arts majoring in Economics, Money, Banking and Public Finance (University of Western Australia).
Mr. Somasundram is a Director of EON Bank Berhad. He was formerly working as an examiner of financial institutions with Bank Negara Malaysia.
Mr. Somasundram has no direct or indirect securities holding in the Company and its subsidiaries. He has no family relationship with any Directors and/or major shareholders of the Company and has no conflict of interest with the Company. He has no convictions for offences within the past 10 years.
Mr. Somasundram attended all the three Board Meetings held since the listing of the Company on 23 December 2002. 10 group structure EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL
EB Nominees (Tempatan) Sdn Bhd
EB Nominees (Asing) Sdn Bhd MIMB Nominees (Tempatan) Sendirian Berhad Malaysian International Merchant Bankers Berhad MIMB Nominees (Asing) Sendirian Berhad
EB Realty Sdn Bhd
CFB Asa Berhad
OBB Realty Sdn Bhd CFB Nominees (Tempatan) Sdn Bhd
EON Finance Berhad
PFB Asa Berhad Oriental Nominee (Tempatan) Sdn Bhd Perkasa Nominees (Tempatan) Sdn Bhd
OFB Berhad
Commercial Banking Merchant Banking Nominee Services
Finance Company Property Investment Dormant group operational structure 11
EON Capital Berhad’s subsidiary, EON Bank Berhad has set up the following the Board and Group Management Committees, with clear terms of references. These Committees, which report to the Bank’s Board, meet regularly to review the Group’s business activities and operations.
BOARD OF DIRECTORS EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL
GROUP ADVISOR EXECUTIVE COMMITTEE
MANAGEMENT DEVELOPMENT & AUDIT COMMITTEE COMPENSATION COMMITTEE
GROUP INTERNAL AUDIT INVESTMENT COMMITTEE
GROUP RISK MANAGEMENT NOMINATING COMMITTEE COMMITTEE
GROUP RISK MANAGEMENT COMPANY SECRETARY
GROUP CHIEF EXECUTIVE OFFICER
GROUP GROUP CREDIT COMMITTEE MANAGEMENT COMMITTEE
GROUP NON-PERFORMING GROUP IT STEERING COMMITTEE LOANS COMMITTEE
GROUP ASSET & LIABILITY COMMITTEE
GROUP GROUP ISLAMIC GROUP GROUP GROUP TREASURY & BANKING & ENTERPRISE INDIVIDUAL MANAGEMENT INVESTMENT DELIVERY BANKING BANKING SERVICES CHANNEL BANKING 12 board and management committees
Executive Committee of Directors (EXCO) The EXCO manages the Group in all aspects of its business, except approval of loans. The Board empowers the Committee to concur, modify or veto loan applications submitted by GCC. The EXCO holds monthly meetings and as and when required.
Audit Committee (AC) The AC appraises the effectiveness of the system of internal controls and corporate governance framework, review audit findings, annual financial statements, appointment of EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL auditors and their performance. The AC holds monthly meeting and as and when required.
Investment Committee (IC) The IC formulates strategies and policies relating to equity investment activities. The IC holds regular meetings.
Management Development & Compensation Committee (MDCC) The MDCC recommends to the Board on policies and framework relating to remuneration, terms of employment and training. The MDCC meets at least once a year and as and when required.
Nominating Committee (NC) The NC is responsible for proposing new nominees for the Board and assess the effectiveness of the board committees. The NC meets at least once a year and as and when required.
Group Risk Management Committee (GRMC) BOARD OF The GRMC assists the Board to oversee the effectiveness of credit, market and operational DIRECTORS risk management of the banking and finance operations. The GRMC holds quarterly meetings. OF EON BANK Group Asset & Liabilities Committee (ALCO) BERHAD The Group ALCO sets objectives and develops policies, procedures and internal measures for the management of the balance sheet structure, market risk and liquidity risk of the Group. The ALCO holds monthly meetings.
Group Credit Committee (GCC) The GCC formulates, reviews and implements credit policy and guidelines approved by the Board and EXCO, as well as approves loan applications. The GCC holds weekly meetings.
Group IT Steering Committee (GITSC) The GITSC develops IT plans, policies, standards and procedures of the Group that are consistent with the business objectives and goals of the Group.
Group Management Committee (GMC) The GMC reviews and formulates the Group’s business plans and policies for EXCO and Board approval, and thereafter implements the approved plans and policies. The GMC holds monthly meetings.
Group Non-Performing Loans Committee (GNPLC) The GNPLC assists the Board to oversee, monitor and make recommendations on reducing the level of non-performing loans in the Group. The GNPLC holds monthly meetings. group management 13
The Board of Directors of EON Capital Berhad is assisted by a group management team in the day to day running of the EON Bank Group. EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL
Y. Bhg. Dato’ Zulkifli bin Ali Abdul Jamel bin Pawanteh Peter Chow Ying Choon Executive Director of EON Bank Berhad Deputy Group Chief Executive Officer, Deputy Chief Executive Officer, Group Islamic Banking & Delivery Channel Group Enterprise Banking
Albert Lau Yiong Martin Chu Leong Meng Gopala Krishnan Deputy Chief Executive Officer, Deputy Chief Executive Officer, Deputy Chief Executive Officer, Group Individual Banking Group Management Services Group Treasury & Investment Banking 14 chairman’s statement EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL
On behalf of the Board of Directors of EON Capital Berhad, I have the pleasure of presenting the first Annual Report and Financial Statements of EON Capital Berhad as a listed entity for the financial year ended 31 December 2002. 15
OVERALL BUSINESS ENVIRONMENT The Malaysia economy continued to grow during the year of 2002 with the Gross Domestic Product (GDP) expanding by 4.2% for the year relative to a growth of 0.4% in year 2001; largely due to domestic demand stimulated by strong exports, continued recovery in investment activities, strong public expenditure and an expansion of private consumption. The expansion of private consumption reflected improved consumer confidence in an environment of supportive fiscal operations implemented by the government.
During 2002, the operating environment for commercial banking and financing businesses in Malaysian banking EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL industry experienced intense competition resulting in erosion of net interest margin. There was a general trend to shift focus to the retail sector and small-and-medium-sized industries.
While expanding the lending and financing business, the banking sector will continue to monitor and improve its asset quality. The potential merging of the commercial banking and finance company of banking groups into single entities is expected to facilitate the banking sector on efficiency improvement and operations enhancement.
OVERVIEW OF THE GROUP With its newly listed status, I am proud to announce that the Group has consolidated its position and the Group is poised to grow its business further as an established retail bank.
EON Capital Berhad which was listed on the Main Board of the Kuala Lumpur Stock Exchange on 23 December 2002 is the holding company of the EON Bank Group. Pursuant to the EON Bank Berhad (EBB) Scheme of Arrangement and Amalgamation between EBB and its shareholders under Section 176 of the Companies Act, 1965, EON Bank Berhad and its subsidiary companies became wholly owned subsidiaries of EON Capital Berhad on 2 December 2002. The EON Bank Group is an integrated financial institution with operations in commercial banking, finance company business, Islamic financing, merchant banking and nominee and custodian services. The principal subsidiaries of EON Bank Berhad are EON Finance Berhad and Malaysian International Merchant Bankers Berhad.
Since January 2001, the EON Bank Group has reorganized itself around customer segments by creating customer focused strategic business units structured on a group wide basis across the various legal entities. The Group is now aligned into five divisions. The Enterprise Banking Division, Individual Banking Division, Islamic Banking & Delivery Channel Division and the Treasury & Investment Banking Division focus on customers’ needs to ensure that customers receive a wider spectrum of quality banking services. The Group Management Services Division provides the corporate and support services based on a group wide shared services concept.
The Group is reaping the synergistic benefits of cross selling products and services through the pooling of resources and expertise, increased efficiency and improved service quality. During the year, twenty eight branches were merged with other existing nearby branches or relocated as part of the Group’s branch rationalisation exercise. In 2002, the Group has also successfully converted four of its branches into one-stop banking centres which offer the full range of services and products of both EON Bank Berhad and EON Finance Berhad under one roof. More of such centres will be opened in 2003.
FINANCIAL PERFORMANCE EON Capital Berhad posted a pre-tax profit of RM37.3 million for the financial year ended 31 December 2002 after incorporating the one month consolidated results of EON Bank Berhad which became its subsidiary on 2 December 2002. The profit after taxation and zakat was RM23.7 million. As at 31 December 2002, the paid-up capital and total shareholders’ funds amounted to RM693.2 million and RM1.8 billion respectively.
No comparative consolidated figures are disclosed under the EON Capital Group as EON Capital Berhad was previously a dormant company which commenced its operations as an investment holding company only upon 16 chairman’s statement { continued }
acquisition of EON Bank Berhad and its subsidiary companies on 2 December 2002. Therefore, to better reflect the underlying business of the EON Capital Group, a review of the financial performance of the EON Bank Group is outlined below.
For the full year to 31 December 2002, the EON Bank Group posted a pre-tax profit of RM390.3 million, an increase of 18.9% from the previous year’s RM328.2 million. This was achieved on the back of a net income of RM867.2 million, a 13.1% increase from RM766.7 million recorded last year. Group profit after taxation and zakat has also improved by 25.3% to RM251.4 million as compared to RM200.6 million achieved in the previous EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL year.
As at 31 December 2002, total shareholders’ funds of the EON Bank Group was RM2.4 billion whilst total assets amounted to RM30.9 billion. The risk weighted capital ratio of EON Bank Berhad and EON Finance Berhad were a healthy 11.8% and 12.2% respectively. In line with the Group’s drive to expand and grow its Islamic financing operations, total assets operated under Syariah principles recorded an increase of 61.4% from RM1.8 billion in 2001 to RM2.9 billion in 2002.
Total net loans, advances and financing of the Group amounted to RM20.6 billion as at 31 December 2002; representing an increase of 18.3% over the RM17.4 billion recorded at end 2001. The Group’s retail and consumer credit portfolio under the Individual Banking Division has shown a robust growth of 24.3% in 2002. Meanwhile, the Enterprise Banking Division reported a corporate and commercial loan growth of 5.4%, with emphasis on lending to the small and medium sized enterprises.
Consistent with the proactive management of the Group’s credit risk exposure, the quantum of net non performing loans within the Group has decreased during the year. The net non-performing loan ratio of the Group has reduced from 5.7% in 2001 to 4.9% in 2002 as a result of the combined effect of a lower quantum of net non performing loans against a higher credit portfolio base.
GROUP BUSINESS DIRECTION The outlook for the Malaysian economy is expected to remain positive in 2003. The main impetus is expected to continue to come from domestic demand, continued recovery in investment activities and the expansion in public sector expenditure. Private consumption picked up in 2002 to expand by 4.2% and the trend for 2003 is expected to be similar in direction, reflecting improved consumer confidence in an environment of supportive fiscal operations implemented by the government. This augurs well for the EON Bank Group as it continued to build on its strength in the retail segment of the financial services business.
The successful listing on the Main Board of the Kuala Lumpur Stock Exchange was a milestone event for the Group. Attaining a listed status affords the Group an avenue to raise capital from the market, should the need arise, to seize new business opportunities and meet new challenges. The Group now stands poised to expand its business areas. We are cautiously optimistic that moderate growth can be achieved in 2003 despite the prevailing uncertainties in the global economy.
IN CLOSING On behalf of the Board of Directors, I would like to thank our employees who have been and continue to be the driving force of the Group’s success. I wish to extend our sincere appreciation to our shareholders and our customers for their valued support. I would also like to express our gratitude to Bank Negara Malaysia and other authorities for their guidance and support.
Tan Sri Dato’ Seri Mohd Saleh bin Sulong Chairman review of operations 17 EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL
Group Enterprise Banking offers credit facilities, both conventional and Islamic, to meet the financing needs of our customers which range from sole-
enterprise banking proprietorships to major corporates.
Group Enterprise Banking
Apart from the branches and Regional Business Centres, the lending activities of Group Enterprise Banking are carried out or supported by specific business units in Head Office comprising Commercial Banking, Bumiputra Enterprise and Public Sector, Branch Credit and Corporate Banking. Commercial Banking focuses on increasing the Group’s customer base of small and medium scale enterprises (SMEs) whilst Bumiputra Enterprise and Public Sector focus on the financing needs of the bumiputra and public sectors. Branch Credit ensures an efficient turnaround of all financing requests from our branches and continually improve on service quality to meet the expectations and needs of our customers. Corporate Banking provides financing to corporations in the form of loans, trade finance or private debt securities. 18 review of operations { continued }
In 2002, enterprise banking loans increased by 5.4% to RM7.8 billion from RM7.4 billion in the previous year. The increase was largely attributable to increase in financing towards the general commerce, telecommunications and manufacturing sectors. Enterprise banking loans constituted 35.3% of the Group’s total loans and advances of RM22.1 billion at end of 2002.
In our effort to expand our loan base in the SME sector, a comprehensive financing package at attractive interest rates and tailored to the needs of the SMEs was launched in 2002. The ‘EON
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Bank SME Easipac’ combined three financing types, namely property financing, working capital financing and equipment financing into one easy financing package for SMEs.
Both Commercial Banking and Bumiputra Enterprise and Public Sector continued to participate actively in various exhibitions, seminars and conventions to further enhance relationship with the small and medium scale business community.
During the year, Bumiputra Enterprise and Public Sector also made significant inroads in providing training and financing to Bumiputra SMEs in co-operation with the Ministry of Entrepreneur Development, Bank Negara Malaysia and State Government agencies. 19 EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL
Group Individual Banking includes all the retail banking business of EON Bank Berhad and the
individual banking entire business of EON Finance Berhad.
Group Individual Banking
The main business activities relate to financing of motor vehicles, retail loans in the broad property sector, retail share margin financing, credit cards, prestige banking, retail deposits, and sale of third-party products and services like bancassurance and unit trusts.
For the year 2002, individual or retail banking has substantially increased its loan assets from RM11.1 billion to RM13.8 billion, an increase of 24.3%.
Despite the competitive low rates, the hire-purchase financing business has increased by 29.0% to reach RM7.7 billion for the year. Loan and financing for purchase of transport vehicles constituted 32.5% of the Group’s total gross loan and financing portfolio at year end. 20 review of operations { continued }
In the broad property sector, the Group continues to provide financing for the purchase of low and medium cost housing units to encourage homeownership. Housing loans increased from RM2.9 billion to RM3.4 billion or 17.2% during the year under review.
In February 2003, the Group announced the results of the ““Around-the-World Trip” Contest and the grand prize was an all-expenses-paid vacation and the classic TD2000 car. The “Free for Life” credit card promotion was launched in August 2002 and successful applicants will
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL enjoy a waiver of annual fees during the life of the cardholders. These two promotions had been successful and 220,000 new cards were issued.
Retail share financing made an impressive growth during the year from RM59.2 million to RM272.2 million or 359.8%, despite the sluggish share market activities.
The Prestige Banking Centre was set up at our Head Office to provide priority banking facilities for the convenience of the Group’s high value individual customers in an efficient and friendly manner.
In addition, the Group continues to draw retail deposits from customers by offering a variety of deposit products and services. Retail deposits have grown from RM17.3 billion to RM18.6 billion for the year.
Bancassurance, unit trust, and third-party products and services will be available at all branches. To further enhance better customer services, some of the branches have been converted to provide both banking and finance company business. Eventually, all branches will be equipped to be one-stop banking centres. 21 EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL
For the year 2002, Group Islamic Banking assets has reached RM2.9 billion while financing and deposits stood at RM1.8 billion and RM1.7 billion
islamic banking respectively.
Group Islamic Banking Division
For the year 2002, Group Islamic banking operations attained a profit before zakat of RM33.9 million, an increase of RM14.0 million or 70% over the previous year of RM19.9 million. Islamic banking has substantially increased its financing assets over the past year by RM0.7 million or 54.1% from RM1.2 billion to RM1.9 billion. The main increase in financing assets came from the housing product of Al-Bai Bithaman Ajil which increased by RM370.6 million or 85.8% from RM431.9 million to RM802.5 million, while the financing of hire purchase product AITAB increased from RM757.2 million to RM1,045.0 million, registering an increase of RM287.8 million or 38%. 22 review of operations { continued }
The increase in customer deposits from RM1.2 billion to RM1.7 billion is mainly attributable to an increase from the Al-Mudharabah investment deposits.
At year end, the Group Islamic banking operations constituted 9.28% of the total banking assets, 8.87% of the total loans, advances and financing and 9.87% of the total deposits. These have exceeded the Bank Negara Malaysia’s target of 8% of the total bank-wide assets, financing and deposits. EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL During the year, several new Islamic Banking products were launched, namely the Ar-Rahnu Pawn Broking facility, the Islamic overdraft facility and the Gratuity Islamic Financing for retired Armed Forces personnel.
In addition to the three full-fledged Islamic banking branches, two new branches were opened to further expand Group Islamic banking operations. The new full-fledged Islamic banking branch in Maju Junction, Kuala Lumpur was opened in December 2002 while the Purtrajaya branch was opened in March 2003. 23 EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL
Group Treasury manages the funding, liquidity and interest rate exposure within the group by supporting both the branches and business units at head office by delivering advice and providing
treasury & investment banking solutions to help customers achieve their goals.
Group Treasury & Investment Banking
Group Treasury consists of the following business lines :- Interest Rate & Capital Market, Islamic Treasury & Capital Market, Corporate Sales, Foreign Exchange, Equity Trading and Financial Institutions & Correspondent Banking.
Group Treasury and Liquidity Management
The Group’s funding and liquidity position was proactively managed resulting in an improvement in deposit mix and lowering of cost of funds while at the same time ensuring adequate liquidity. Marketing efforts were intensified to maintain close rapport with depositors and to increase the Group’s deposit base during the year. 24 review of operations { continued }
Ample liquidity in banking system provided conducive market conditions for fixed income trading which resulted in the Group recording an improved performance in 2002. The overall local bond market moved in tandem with a rising US bond market, as the low yields of the US Treasuries and a weak stock market in the US gave rise to a bullish global bond market. Group Treasury was able to take advantage of the decline in yields by selectively purchasing quality assets for trading, investment and liquidity requirements. During the year, Group Treasury had stepped up its activities particularly in the distribution, trading and investment of money and
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL capital market instruments.
The Division had continued to provide value-added services to other business units of the Group with regard to marketing, funding, pricing and distribution of the Group’s products and services.
The Division’s team of experienced dealers represents the Group’s presence in the Ringgit money market and capital market. The money market instruments traded include Malaysian Government Securities, Bank Negara Securities, Banker Acceptances, Negotiable Instruments of Deposit, Cagamas Bonds, Government Agencies Securities, Islamic Money Market Instruments and Corporate Debt Securities.
Foreign Exchange Foreign exchange activities of major currencies in the second half of 2002 were largely influenced by the weakening of the US dollar amidst mounting concerns of corporate accounting and auditing practices.
In light of the volatility of the foreign exchange market in recent years, it has been the focus of Group Treasury to enhance and market foreign exchange services to the Bank’s retail and corporate customers to help them mitigate foreign exchange risk. This has been successfully achieved by the increase in marketing personnel in Group Treasury to develop customer relationships and also through constant review of existing and potential agencies. Correspondent relationships with major international banks were also established in order to provide customers with quality remittance and trade finance facilities. During the year, Group Treasury was able to increase fee income from foreign exchange business despite slimmer margins and increased competition.
Investment in Equity The Kuala Lumpur stock market was one of the best performing Asian markets in 2002. Unfortunately, it was a profitless performance. The plantation sector was the top performer on the back of rising CPO prices whereas the worst performing sectors were electronics and telecommunications. The Kuala Lumpur Composite Index (KLCI) reached a high of 808 in April 2002 on expectation of a strong cyclical recovery. However, the recovery was threatened by a sequence of external factors, ranging from accounting scandals and geopolitical tensions to renewed economic weakness. The KLCI ended the year at 646 amidst the slump in global equity markets.
Notwithstanding the choppy market conditions, the division managed to outperform the KLCI through prudent investment strategies adopted during the year. 25
Merchant Banking The merchant banking arm of EON Bank Group, Malaysian International Merchant Bankers Berhad (“MIMB”) continued to focus on growing its transactional and fee-based income. During the year, MIMB has successfully advised and completed several capital raising, debt restructuring and mergers and acquisitions exercises, with total transaction value in excess of RM4.1 billion. MIMB also successfully completed several Initial Public Offers with total market capitalisation of more than RM700 million. In addition, MIMB acted as the Arranger and Lead Manager of several Conventional and Islamic Private Debt Securities issues with a total value of RM1.8 2002 BERHAD • ANNUAL REPORT EON CAPITAL billion during the year. 25
Merchant Banking The merchant banking arm of EON Bank Group, Malaysian International Merchant Bankers Berhad (“MIMB”) continued to focus on growing its transactional and fee-based income. During the year, MIMB has successfully advised and completed several capital raising, debt restructuring and mergers and acquisitions exercises, with total transaction value in excess of RM4.1 billion. MIMB also successfully completed several Initial Public Offers with total market capitalisation of more than RM700 million. In addition, MIMB acted as the Arranger and Lead Manager of several Conventional and Islamic Private Debt Securities issues with a total value of RM1.8 2002 BERHAD • ANNUAL REPORT EON CAPITAL billion during the year. Annual Report 2002 contents
Statement on Corporate Governance 26
Additional Compliance Information 31
Statement of Directors’ Responsibility for Preparing the Financial Statements 32 Audit Committee Report 33
Statement of Internal Control 36
Risk Management Framework 38
Calendar of Significant Events and Activities 39
Analysis of Shareholdings 40
List of Properties Held by The Group 44
Group Corporate Directory 48 26 statement on corporate governance
The Board of Directors of EON Capital Berhad is committed to ensure that the highest standards of corporate governance are practiced throughout EON Capital Berhad and its group of companies as a fundamental part of discharging its responsibilities to protect and enhance shareholders value and financial performance.
Set out below is a statement by the Board of Directors of EON Capital Berhad on the application by the Group of the principles contained in the Malaysian Code on Corporate Governance (‘Code’), and the extent of compliance with the best practices of the Code, since the listing of the Company on the Main Board of Kuala Lumpur Stock
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Exchange (KLSE) on 23 December 2002.
BOARD OF DIRECTORS
Composition of the Board The new Board, formed on 17 December 2002, currently has six (6) members, all of whom are Non-Executive Directors; of which four (4) are non-independent and two (2) are independent. This is in line with the Listing Requirements of KLSE which requires at least two (2) directors or one third (1/3) of the Board of Directors to be independent Directors. The Independent Non-Executive Directors provide an independent judgement to the decision making of the Board and Board Committees, with Y.Bhg. Datin Dr. Umikalsum binti Mohd Noh as the Senior Independent Non-Executive Director to whom concerns may be conveyed.
The Directors bring together a wide range of business management skills and banking and financial experience to the Board. Their background, diversity, quality, skills and experience lends strength to strategic directions of the Group. Decision making is by majority and no single Board member can make any decision on behalf of the Board, unless duly authorised by the Board.
The profiles of the members of the Board are presented on page 7 to 9 of the Annual Report.
Board Responsibilities The Board has the responsibility for the overall corporate governance and performance of the Group. The Board:
• Charts the direction of the Group by setting objectives and strategies and establishing policy guidelines and performance targets. • Monitors Management’s running of the business to ensure implementation is in accordance with the agreed framework. • Through the Audit Committee, liaises with the external auditors on accounting policies and practices, compliance issues and reporting to shareholders.
Board Meetings Following the completion of the corporate exercise on 23 December 2002, three board meetings have been held in January, February and April 2003. The Board plans to meet at least 4 times a year with additional meetings to be convened as and when necessary.
Details of attendance of Board of Directors at board meetings are presented on page 3 of the Annual Report.
The Board of EON Bank Berhad meets on a monthly basis to consider and deliberate key business and financial issues relating to the banking and finance company business. The Board met twelve (12) times during the year 2002. All Directors have attended at least 75% of the board meetings convened. 27
At each regularly scheduled meeting, there will be a financial and business review for discussion. The agenda for each board meeting, together with detailed reports and proposition papers to be tabled at the board meeting, will be circulated to the Directors prior to the board meeting to give Directors time to consider and deliberate on the issues to be raised at the board meetings. The Directors have full access to senior management and the advice of the Company Secretary and may seek external professional advice if required.
Board Committee
The Audit Committee of EON Capital Berhad has been established on 23 December 2002 to implement and 2002 BERHAD • ANNUAL REPORT EON CAPITAL support the oversight function of the Board. Separate Audit Committee of its principal subsidiaries, namely EON Bank Berhad, EON Finance Berhad, and Malaysian International Merchant Bankers Berhad are in operation. All Audit Committees appraises the effectiveness of the system of internal controls and corporate governance framework, review annual financial statements, audit findings from internal auditors, external auditors and regulatory authorities and recommends appropriate remedial action to their respective Boards.
The Report of the Board of Audit Committee is set out on pages 33 to 35 of the Annual Report.
Nominating Committee and Group Remuneration Committee The Board has established the Nominating Committee and the Group Remuneration Committee on 23 April 2003 with the objective to enhance the Group’s corporate governance.
The members of the Nominating Committee and Group Remuneration Committee are as follows :-
Nominating Committee Group Remuneration Committee
Y. Bhg. Tan Sri Dato’ Seri Mohd Saleh bin Sulong Y. Bhg. Tan Sri Dato’ Seri Mohd Saleh bin Sulong (Chairman) (Chairman)
Y. Bhg. Datin Dr. Umikalsum binti Mohd Noh Y. Bhg. Datin Dr. Umikalsum binti Mohd Noh
Mr. Wizayaratnam Somasundram Y. Bhg. Dato’ Maznah binti Abdul Jalil
The Nominating Committee meets at least once a year and is responsible to:
• Recommend on the appointment of Directors to the Board of the Company and its subsidiaries after taking into account the required mix of expertise and experience; • Recommend on the appointment of chief executive officer of the Company and to endorse appointment of chief executive officers within the EON Bank Group as recommended by EON Bank Nominating Committee; and • Perform any other functions as authorised by the Board.
The Group Remuneration Committee meets at least once a year and is responsible to:
• Recommend to the Board the remuneration of the executive directors in all its form, drawing from outside advice as neccessary; • Recommend to the Board the Directors’ fees, allowance and other remuneration; and • Perform any other functions as authorised by the Board. 28 statement on corporate governance { continued }
The Board of EON Bank Berhad is also assisted by its Nominating Committee and Management Development and Compensation Committee in identifying and nominating new Directors to the Board and evaluate the performance and remuneration of its Executive Directors and Senior Management.
Other Board and Management Committees set up in EON Bank Group with clear terms of reference are presented on page 11 to 12 of the Annual Report.
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Directors’ Training All the Directors have attended the Mandatory Accreditation Programme conducted by Research Institute of Investment Analysts Malaysia. Directors are encouraged to attend continuous education programmes and seminars to keep abreast with developments in the market place.
Appointment of Directors New appointments to the Board are recommended by the Nominating Committee to the Board for consideration and approval with due consideration given to the mix of expertise and experience required for an effective Board. As the Company is the holding company of a licensed financial institution, the appointment of Board members also requires the prior written approval of Bank Negara Malaysia pursuant to the Banking and Financial Institutions Act, 1989.
Re-Election of Directors In accordance with the Company’s Articles of Association, all Directors who are appointed by the Board are subject to re-election by shareholders at the Annual General Meeting following their appointments.
The Articles also provide that one third of the Directors shall retire from office at each Annual General Meeting, provided always that all the Directors shall retire from office at least once in every three years.
DIRECTORS’ REMUNERATION
The Directors’ remuneration is determined to ensure that the Group attracts and retains Directors with relevant experience and calibre that is needed to manage the Group successfully.
In view that all the Board members are Non-Executive Directors, the determination of the remuneration of Non- Executive Directors is a matter for the Board as a whole. The Directors concerned are abstained from participating in the review of their own remuneration.
The remuneration of the Non-Executive Directors reflects the level of responsibilities undertaken by them, which mainly consist of annual fees and attendance allowances for each meeting that they attend. All fees received by the Directors for their services will be tabled at the Annual General Meeting for shareholders’ approval before payment is made. 29
The aggregate remuneration paid to Non-Executive Directors by the Group during the year, analysed into bands of RM50,000 are as follows:
Directors’ Remuneration No. of Directors
RM50,001 - RM100,000 1
RM150,001 - RM200,000 2 EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL RM200,001 - RM250,000 1
RM250,001 - RM300,000 2
The aggregate remuneration paid to Non-Executive Directors, analysed by category are disclosed in Note 26 to the financial statements as set out in page 105 of the Annual Report.
The only area of non-compliance with the Code is the recommended disclosure of details of the remuneration of each Director. The Board of EON Capital Berhad is of the view that the disclosure of the remuneration by bands of its Directors is sufficient to meet the objective of the Code.
Investor Relations and Shareholders Communications EON Capital Berhad recognises the need to keep communications lines clear and accessible to both Investors and Shareholders. Besides the mandatory reporting and the public announcements of the Group’s financial results to KLSE, regulatory bodies and other relevant authorities, the Company keeps the members of the investing community and the shareholders abreast of its developments through press releases and the Group’s web site.
The Annual General Meeting (AGM) is the principal forum for dialogue between the company and its shareholders. Shareholders are given ample notice to prepare or present questions to the Board at the AGM. The AGM is also an excellent opportunity for shareholders to direct questions to the Board in relation to the company’s financial performance and the company’s activities.
In 2003, the Company intends to promote and elevate the profile of the Company with quarterly briefings to the investing community via the fund managers, investment analysts, shareholder groups and the public at large.
The Company has also established a page dedicated to the investing community on the Group’s web site at www.eonbank.com.my. Investors and members of the public who wish to contact the company and its subsidiaries on any matters, relating to the their shareholdings and investments can channel their queries through e-mail, via the Bank’s website or contact the following personnel:
Name Telephone No. E-mail address
Group Corporate Affairs 03-2694 1188 Ext. 2230, 2158, 2816 [email protected] 30 statement on corporate governance { continued }
ACCOUNTABILITY AND AUDIT
Financial Reporting The Directors have a responsibility to present a balanced and understandable assessment of the Group’s position and prospects in the quarterly report to KLSE and the annual report to shareholders. The Audit Committee assists the Board in scrutinising information for disclosure to ensure the accuracy, adequacy and completeness.
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL The Statement of Directors’ responsibility for preparing the financial statements is set out on page 32 of the Annual Report.
Internal Control The Board has overall responsibility for the Group’s approach to assessing risks and implementing controls. The Board, through the Audit Committee, oversees that a system of internal controls is properly maintained and regularly reviewed to ensure effectiveness. It entrusts the Audit Committee with the review of the audit plan, audit processes and most important of all, audit independence. The Audit Committee keeps the Board notified of the identification and management of risks and the controls that minimize and mitigate such risks.
The Group’s Statement of Internal Control is set up on page 36 to 37 of the Annual Report.
Relationship with Auditors Through the Audit Committee, the Group has established a transparent and appropriate relationship with its internal and external auditors. The Audit Committee would on a yearly basis hold a special meeting with the external auditors without the presence of management in the review of the overall affairs of the Group. Audit fees, audit plan and work scope of the auditors would be duly reviewed and evaluated by the Audit Committee. additional compliance information 31
The following information is provided in conformance to paragraph 9.25 of the Listing Requirements of Kuala Lumpur Stock Exchange:
1. Utilisation of Proceeds raised from Corporate Proposal The Corporate Exercise mentioned in Company’s Directors’ Report set out in page 61 was completed at the date of this Report. The proceeds raised from the issuance of new ordinary shares capital pursuant to the KCHB Scheme of Arrangement and the secured fixed rate bonds were utilised to finance the cash
consideration arising from the acquisition of EON Bank Group pursuant to the EBB Scheme of Arrangement. 2002 BERHAD • ANNUAL REPORT EON CAPITAL
2. Sanctions and/or Penalties During the financial year, there are no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or management by the relevant regulatory bodies.
3. Non-Audit Fees The amount of non-audit fees paid and payable by the Company and its subsidiaries to the external auditors and their affiliated companies for the financial year ended 31 December 2002 was RM498,000.
4. Material Contracts There are no material contracts relating to loans (not being contracts entered into in the ordinary course of business) of the Company and its subsidiaries, involving Directors’ and major shareholders’ interests, either still susbsisting at the end of the financial year or entered into since the end of the previous year.
5. Recurrent Related Party Transactions In relation to Recurrent Related Party Transactions (‘Recurrent Transactions’) of a revenue or trading nature which are necessary for the Group’s day-to-day operations and transacted in the ordinary course of business with related parties, the Company will make an immediate announcement to the Kuala Lumpur Stock Exchange where the consideration, value of the assets, capital outlay or costs of the Recurrent Transaction is equal to or exceeds RM1 million; or the percentage ratio of such Recurrent Transaction is equal to or exceeds 1%, whichever is the lower. The Board has no intention to obtain Shareholders’ Mandate for Recurrent Transactions after considering the frequency or regularity of such transactions, as well as cost and benefit involved. 32 statement of directors’ responsibility for preparing the financial statements
In the course of preparing the annual financial statements of the Group and of the Company, the Directors are collectively responsible in ensuring that these financial statements are drawn up in accordance with the requirements of the applicable approved accounting standards in Malaysia, Bank Negara Guidelines, the provisions of the Companies Act, 1965 and the Listing Requirements of the Kuala Lumpur Stock Exchange.
It is the responsibility of the Directors to ensure that the financial reporting of the Group and of the Company present a true and fair view of the state of affairs of the Group and of the Company as of the end of the financial
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL year and the results and cash flows for the financial year then ended.
The Directors have adopted and applied the appropriate and relevant accounting policies on a consistent basis and made judgements and estimates that are prudent and reasonable in preparing the financial statements of the Group and of the Company.
The financial statements are prepared on a going concern basis and the Directors have ensured that proper accounting records are kept so as to enable the preparation of the financial statements with reasonable accuracy.
The Directors have also taken the necessary steps to ensure that appropriate systems are in place to safeguard the assets of the Group and of the Company and to prevent and detect fraud and other irregularities. The systems, by their nature, can only provide reasonable and not absolute assurance against material misstatements, loss and fraud.
The Statements by Directors pursuant to Section 169 of the Companies Act, 1965 is set out on page 67 of the Annual Report. audit committee report 33
1. MEMBERSHIP The Audit Committee serves to implement and support the oversight function of the Board. Details of its membership are as follows;
Composition Designation/directorship status
Y. Bhg. Datin Dr. Umikalsum binti Mohd Noh Chairperson/Independent Non-Executive Director
Y. Bhg. Tan Sri Dato’ Seri Mohd Saleh bin Sulong Member/Non-Independent Executive Director 2002 BERHAD • ANNUAL REPORT EON CAPITAL
Mr. Wizayaratnam Somasundram Member/Independent Non-Executive Director
The Audit Committee was established on 23 December 2002. Since its establishment, there were two (2) meetings convened in January and April 2003. The details of the attendance of each member are as follows:
No. Directors Attendance
1. Y. Bhg. Datin Dr. Umikalsum binti Mohd Noh 2 out of 2 meetings 2. Y. Bhg. Tan Sri Dato’ Seri Mohd Saleh bin Sulong 2 out of 2 meetings 3. Mr. Wizayaratnam Somasundram 2 out of 2 meetings
The EON Bank Berhad’s Audit Committee meet regularly to appraise the effectiveness of the system of internal controls and corporate governance framework, review annual financial statements, audit findings from internal auditors, external auditors and regulatory authorities and recommends appropriate remedial action to their respective Boards. The Committee met thirteen (13) times during 2002. All members have attended at least 75% of the meetings convened.
2. COMPOSITION AND TERMS OF REFERENCE
2.1 Members The members of the Committee are appointed by the Board of Directors. The Committee shall consist of not less than 3 members, the majority of whom shall be independent non-executive directors. A quorum shall consist of two members, all of whom shall be independent non-executive directors.
2.2 Chairman The Chairman of the Committee must be an independent non-executive director.
2.3 Secretary All proceedings of the meetings are minuted by the Secretary of the Committee, who shall be the Company Secretary or such other person appointed by the Board.
2.4 Meetings Meetings are to be held on a quarterly basis of which one would specifically be a private meeting with the internal and external auditors to discuss issues relating to the financial condition, risk, governance and control aspects of the EON Bank Group.
2.5 Authority The Board authorises the Committee to seek any information or legal and professional advice it requires in carrying out its role and responsibility. All employees are directed to cooperate with any requests made by the Committee. 34 audit committee report { continued }
3. DUTIES & RESPONSIBILITIES The duties and responsibilities of the Audit Committee are, in relation to the following;
i. External auditor • Consider the appointment, resignation or dismissal of the external auditor • Discuss on audit engagement letters, audit scope and methodology, audit fees, changes in statutory and accounting requirements and non-audit services
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL • Review assistance given by the management and its staff to the auditors and any findings and action to be taken • Review internal controls of the Group and disclosure through the Statement of Internal Control • Review the audit report including differences in views between auditors and management, cooperation extended for the audit, accounting methods, implementation of audit recommendations, compliance with regulations and statutory requirements, financial information consistent with business of the company and any sensitive reporting, unusual or significant issues • Review the adequacy of the scope, functions and resources of the internal audit function and coordination of audit work with the internal auditors
ii. Internal auditor • Review the internal audit plan and performance • Evaluate compliance with internal auditing standards • Discuss critical or major findings in the various operations audited by the Internal Audit Department of the EON Bank Group • Review the minutes of the audit committee meetings or any other committee meetings if so required • Ensure management response and action to audit findings and recommendations • Review the statements of internal control of the Group including the adequacy and integrity of the EON Bank Group’s management information systems and systems for compliance with applicable laws, regulations, rules, directives and guidelines • Review the appointment, performance and remuneration of the Chief Internal Auditor • Appraise the risk management and corporate governance framework of the Group
iii. Others • Review the timeliness of quarterly and year-end financial results and that there is adequacy of provisions against contingencies, and bad and doubtful debts, any changes in accounting practices or policies and significant adjustments if any • Ensure promptness in publication of annual report with necessary disclosure • Evaluate the control environment in relation to audit and control issues, emerging issues and trends • Consider significant legal claims or contingent liabilities • Consider any related party transactions that may arise within the Company or Group • Report to the board on its activities, significant results and findings • Undertake such other responsibilities as agreed with the Board 35
4. THE INTERNAL AUDIT FUNCTION AND SUMMARY OF ACTIVITIES The Company’s internal audit function is carried out by the Group Internal Audit Department established in EON Bank Berhad. The Group Internal Audit has in place a charter that covers its independence in the organization structure to provide objective evaluation of risks and controls in the auditable activities.
During the year, the Group Internal Audit presented its audit plans, audit budget and scope of work to the EON Bank’s Audit Committee for approval. In accordance with the Bank Negara Malaysia guidelines (BNM
GP10), the audit planning is on a risk-based approach. The scheduled audits are conducted and audit 2002 BERHAD • ANNUAL REPORT EON CAPITAL reports are duly tabled to the respective audit committees in the EON Bank Group. Audit findings and recommendations in the reports are followed up for rectification and resolution and the status is duly reported to the respective audit committees. Deadlines are set for rectification or resolution of audit issues. Where the result of an audit is not satisfactory, a formal follow-up audit is conducted and reported to the respective audit committees.
In addition to audit assignments, the Group Internal Audit was also involved actively in the various information technology and product development projects as well as in the review of policy and operational guidelines and manuals on an advisory capacity. Such participation is deemed important in reviewing the controls of project management and the setting up of pertinent controls of the system or product prior to implementation. All activities of the Group Internal Audit Department are reported to the EON Bank’s Audit Committee on a quarterly basis. The Audit Committee regularly appraises the resources and training needs of Group Internal Audit to meet the competencies and skills required for effective performance of internal auditing for the Group. 36 statement of internal control
The Board is responsible for the internal control systems in EON Capital Berhad and its subsidiaries and reviews the adequacy and integrity of those systems in addressing business and operations risks. It should be noted that such systems are designed to manage rather than eliminate risk of failure to achieve business objectives. Moreover, such systems can provide only reasonable and not absolute assurance against material misstatement or loss. EON Capital Berhad relies entirely on the EON Bank Group throughout the financial period under review and up to date of this report for internal control. The Directors of EON Capital Berhad have been made aware that no events have occurred between the period end to the date of approval of the Annual Report, which
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL would materially affect the Statement of Internal Control.
The key controls of the EON Bank Group are :
Business and Organisational Structure Financial planning and budgets are prepared on an annual basis. They are reviewed and approved by the Board and results are monitored on a monthly basis to assess performance. The organisation is structured into business and support functions with delegation of signing authorities and lending powers in meeting business objectives and operational needs. The appointment of executives to the most senior positions within the Group is reviewed and approved by the Board. Functional, operational and financial reporting standards and guidelines are established by the management for its application across the entire Group. Exception incidents and any deviation from approved standards or guidelines are reviewed, and remedial steps including disciplinary action taken where appropriate. Such incidents and deviations are included in the audit reports tabled to the Audit Committee of the Board and where serious, reported also to the Board.
Financial reporting The Group has in place, documented accounting policies and procedures for guidance and compliance with regulatory and statutory requirements. Financial information prepared for submission are duly checked and authorised for release to the governing authorities and to the various committees and the Board.
Risk Management The Board ensures that there is an on-going process for identifying, evaluating and managing the significant risks faced by the Group. It has put in place the Group Risk Committee (established on 23 June 2001) as the driver with a Group Risk Management function that supports it. Group Risk Management assists with the establishment of policies on market risk, credit risk and operational risk, reviews compliance with set risk limits and identifies emerging risk issues. It has representation in decision-making meetings of the Group Asset & Liability Committee and Group Credit Committee. The Board also receives risk reports for its review and decision.
The Operational Risk unit under the Group Risk Management function is tasked with the responsibility of promoting risk and control awareness. Operational risks are inherent in the complexity of banking operations particularly in branch and other delivery channels and in IT infrastructure and activities. The branch network is overseen by a Branch Supervision function which has in place, a self-audit checklist to institute continual awareness and implementation of controls. Audit reports on the compliance level for controls as well as adequacy and integrity of management information systems, are reviewed regularly by the Audit Committee, with reports to the Board on emerging issues and trends.
Currently, the Group is embarking on various projects to enhance its IT infrastructure to meet business needs and the overall risk management framework to meet regulatory requirements and as an enhancement to the business process. 37
Procedural guidelines and training and development programs Policy and procedural manuals are established to guide and support business operations. Approved policies on IT security, internal controls and human resources management are disseminated group-wide with relevant training programs in place to enhance implementation. The training programs are designed to build and strengthen human capital, which the Group recognises as crucial to its achievement of corporate goals. Job rotation and enrichment and management development programs are also put in place to support succession planning to ensure continuity of business. EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Internal audit An internal audit function is established at the Group to assist the Board in monitoring compliance, making recommendations for continuous improvement to processes, systems and people development and reviewing the effectiveness of the internal control structures. The internal audit function also participates in risk management and IT projects to provide assurance of good governance and application of security controls.
The Audit Committee regularly reviews the adequacy and integrity of the system of internal controls and the Group’s management information systems. It deliberates on the dissemination of information and establishment of proper communication channels so as to ensure that the compliance with applicable laws, regulations, rules, directives and guidelines are in place.
The Audit Committee reports to the Board on a monthly basis on its meetings and findings on reports and papers tabled. The Board also obtains a summary on the review of the adequacy and integrity of the system of internal controls through reports from the Audit Committee as well as the Chief Internal Auditor. The Board also reviews actions taken by Management in addressing audit or risk issues and the implementation of audit recommendations. 38 risk management framework
The Group of companies is exposed to various types of risk: market risk, the potential loss arising from adverse changes in interest rates, foreign exchange, and equity prices; liquidity risk, the difficulty in meeting current and, or future contractual payment obligations as they arise; credit risk, the potential loss arising from customers or counterparties failing to meet their contractual obligation to repay principal and, or interest as they fall due; and finally operational risk, the potential loss arising from inadequate or failed internal processes, people and systems, or from external events.
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL The Group manages these risk as follows:
Market risk: interest rate risk is managed by way of portfolio limit, interest rate repricing gap and stop loss limits; foreign exchange risk is managed by the aggregate net open position limit, currency net open position limit and stop loss limits; and equities risk is managed by way of portfolio limit, sectoral limit, individual stocks limit and stop loss limits.
Liquidity risk: In addition to the New Liquidity Framework approved by Bank Negara Malaysia, the Group has a set of “Management Action Triggers” which are intended to forewarn potential liquidity risk, and once these “Management Action Triggers” are exceeded and confirmed, a Board approved Contingency Funding Plan would be activated to resolve the problem proactively.
Credit risk is managed by way of approved credit policy, a structured process that is guided by credit concentration levels: by sector; by product; and large borrower class, and by prevailing business and economic conditions.
Operational risk is managed by way of policies, manuals, structured process and control processes that are reviewed and strengthened periodically. And introduction of new products in the Group undergoes a stringent vetting process by several authorities within the Group as guided by the “New Product Process” methodology approved by the Board. The Group also has a Business Continuity Plan that addresses business resumption in an organized and timely manner in time of disaster. calendar of significant events and activities 39 For year 2002
January 2002 • Signing of a conditonal agreement between EON Bank, Edaran Otomobil Nasional Berhad, Kedah Cements Holdings Berhad, Malayan Cement Berhad, and EON Capital Berhad to facilitate the listing of EON Bank Group through EON Capital Berhad
February 2002 • EON Bank gave away the Grand Prize of a classic TD2000 car to the winner of the Around-
the-World Trip Contest. 2002 BERHAD • ANNUAL REPORT EON CAPITAL
March 2002 • MIMB held a seminar in Penang to introduce the availability of domestic debt and equity markets opportunities to small and medium-scale enterprise in the Northern Region.
May 2002 • MIMB signed a strategic alliance agreement with Macquarie (Malaysia) Sdn Bhd to enhance their business and activities in Malaysia.
• MIMB is the co-arranger/primary subscriber for the RM185 million Nominal Value Redeemable Secured Serial Bonds issued by Ikatan Perkasa Sdn Bhd
August 2002 • Dato’ Zulkifli, Executive Director of EON Bank launched the country’s first Army Gratuity Islamic Financing for retired Armed Forces personnel by donating a sum of RM5,000 to the Tabung Rayuan Hari Pahlawan. On hand to receive the donation was the Minister of Defence, YB Dato’ Najib.
• EON Bank launched the industry’s first-ever “FREE for LIFE” credit card. The Visa or Master membership is applicable to all new and existing cardholders.
September 2002 • MIMB arranged a RM100 million Murabahah Commercial paper/Murabahah Medium Term Note for Edaran Komputer Sdn Bhd.
• MIMB was appointed lead arranger and primary subscriber for Grand Saga Sdn Bhd’s RM210 million Islamic private debt securities.
• MIMB held a signing ceremony with KESAS Sdn Bhd for a RM900 million Islamic lona- refinancing programme. MIMB was the lead arranger for BalDS and Munif/IMTN and the primary subscriber for BalDS, while the sole underwriter for Munif was EON Bank Bhd
December 2002 • EON Bank Group entered into a strategic alliance with EON CMG Life and South East Asia (SEA) Insurance Berhad to provide Bancassurance. EON Bank Group will offer five life products with four riders namely investment, education, retirement, mortgage and critical illness protection. Bancassurance will also provide four types of general insurance products.
• EON Capital Berhad was listed on the Main Board of KLSE on 23 December. 40 analysis of shareholdings As At 31 March 2003
Class of Shares : Ordinary Shares of RM1.00 each fully paid Voting Rights : One vote per share
DISTRIBUTION OF SHAREHOLDINGS
Size of shareholding No. of % of Total % of Total Shareholders Shareholders Holdings holdings EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Less than 1,000 1,562 15.09 922,837 0.13 1,000 to 10,000 7,420 71.69 23,663,134 3.41 10,001 to 100,000 1,222 11.81 33,776,862 4.87 100,001 to less than 5% of issued shares 143 1.38 138,819,902 20.03 5% and above of issued shares 3 0.03 496,025,997 71.56
Total 10,350 100.00 693,208,732 100.00
SUBSTANTIAL SHAREHOLDERS
No. of Shares No. of Shares Name Held Direct Held Indirect Percentage
1. Edaran Otomobil Nasional Berhad (EON) 347,270,469 - 50.10
2. R.H. Development Corporation Sdn Bhd (RHD) 112,717,213 - 16.26
3. Ceria Alam Sdn Bhd (CA) 60,364,381 - 8.71
4. HICOM Holdings Berhad (HICOM) - 347,270,469 A 50.10
5. DRB-HICOM Berhad - 347,270,469 B 50.10
6. Mega Consolidated Sdn Bhd - 347,270,469 C 50.10
7. Gadek (Malaysia) Berhad - 347,270,469 C 50.10
8. Tan Sri Dato’ Seri Mohd Saleh bin Sulong - 347,270,469 C 50.10
9. Citaria Sdn Bhd - 347,270,469 C 50.10
10. Sharikat Manhamat Sdn Bhd - 347,270,469 C 50.10
11. Billiards Distributors Sdn Bhd - 347,270,469 C 50.10
12. Estate of Allahyarham Tan Sri Dato’ Seri Yahaya bin Ahmad - 347,270,469 C 50.10
13. Dato’ Yatina bte Yahaya - 347,270,469 C 50.10
14. Dato’ Tik bin Mustaffa - 347,270,469 C 50.10
15. Ahmad Othman bin Yahaya - 347,270,469 C 50.10 41
No. of Shares No. of Shares Name Held Direct Held Indirect Percentage
16. Ahmad Faez bin Yahaya - 347,270,469 C 50.10
17. Jardine Strategic Malaysian Investments Pte Ltd (held through Hwang-DBS Custodian Nominees (Asing) Sdn Bhd) (JSMI) - 347,270,469 D 50.10 EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL 18. JSH Asian Holdings Limited (JSHA) - 347,270,469 E 50.10
19. Jardine Strategic Holdings Limited - 347,270,469 F 50.10
20. Tan Sri Datuk Diong Hiew King @ Tiong Hiew King - 119,567,580 G 17.25
21. Tiong Ik King 43 119,567,580 G 17.25
22. Tiong Kiong King - 119,567,580 G 17.25
23. Tiong Kiu King - 119,567,580 G 17.25
24. Tiong Thai King - 119,567,580 G 17.25
25. Tiong Chiong Ong - 119,567,580 G 17.25
26. Tiong Chiew - 119,567,580 G 17.25
27. Dato’ Zulkifli bin Ali 308,436 60,364,381 H 8.75
28. Datuk Hassan bin Che Abas - 60,364,381 H 8.71
Notes:
A Deemed interested in ECB through its substantial interest in EON. B Deemed interested in ECB through its effectively wholly-owned subsidiary HICOM, which is a major shareholder of EON. C Deemed interested in ECB by virtue of its/his/her deemed substantial interest in EON. D Deemed interested in ECB through its substantial interest in EON. E Deemed interested in ECB through its wholly-owned subsidiary, JSMI, which is a major shareholder of EON. F Deemed interested in ECB through its wholly-owned subsidiary, JSHA which in turn is deemed interested through its wholly-owned subsidiary, JSMI, which is a major shareholder of EON. G Deemed interested in ECB via his/her substantial direct and indirect interest in RHD and in Tiong Toh Siong Holdings Sdn Bhd. H Deemed interested in ECB via his substantial direct interest in CA. 42 analysis of shareholdings { continued }
STATEMENT ON DIRECTORS’ INTERESTS
No. of Shares No. of Shares Name Held Direct Held Indirect Percentage
1. Tan Sri Dato’ Seri Mohd Saleh bin Sulong - 347,270,469 * 50.10
2. Datin Dr. Umikalsum binti Mohd Noh 79,006 - 0.01 EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL 3. Mr. Rin Kei Mei 39,550 2,073,817 ^ 0.31
4. Dato’ Maznah binti Abdul Jalil - - -
5. Dr. Tiong Ik King 43 119,567,580 # 17.25
6. Mr. Wizayaratnam Somasundram - - -
Notes:
* Deemed interested in ECB by virtue of his deemed substantial interest in EON. ^ Deemed interested in ECB by virtue of his substantial direct interest in Lintang Emas Sdn Bhd. # Deemed interested via his substantial direct and indirect interest in RHD and in Tiong Toh Siong Holdings Sdn Bhd.
EON CAPITAL BERHAD - LIST OF 30 LARGEST SHAREHOLDERS
Registered Shareholder Shares % Beneficial Owner
1. EDARAN OTOMOBIL NASIONAL BERHAD 347,270,469 50.10
2. R.H. DEVELOPMENT CORPORATION SDN BHD 112,717,213 16.26
3. CERIA ALAM SDN BHD 60,364,381 8.71
4. MUSMAN HOLDINGS SDN BHD 11,891,157 1.72
5. TIONG TOH SIONG HOLDINGS SDN BHD 6,850,367 0.99
6. KENANGA NOMINEES (TEMPATAN) SDN BHD 6,124,588 0.88 FOR LEMBAGA KEMAJUAN BINTULU
7. MAYBAN NOMINEES (TEMPATAN) SDN BHD 5,040,000 0.73 PLEDGED SECURITIES ACCOUNT FOR EMPIRE WOOD SDN BHD
8. LING PUNG SUNG@ LING BENG SUNG 4,528,091 0.65
9. EMPLOYEES PROVIDENT FUND BOARD 4,011,000 0.58
10. HSBC NOMINEES (ASING) SDN BHD 3,750,000 0.54 HSBC SG FOR LEE RUBBER COMPANY PTE LTD
11. RINWOOD SDN BHD 3,445,448 0.50 43
Registered Shareholder Shares % Beneficial Owner
12. MALAYSIAN NATIONAL REINSURANCE BERHAD 3,341,000 0.48
13. EMPIRE WOOD SDN BHD 3,142,450 0.45
14. CITICORP NOMINEES (TEMPATAN) SDN BHD 3,000,000 0.43 ORIENTAL RUBBER & PALM OIL SDN BHD EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL
15. YENG HO HONG COMPANY SDN BHD 2,573,128 0.37
16. SBBAM NOMINEES (TEMPATAN) SDN BHD 2,459,000 0.35 EMPLOYEES PROVIDENT FUND BOARD
17. YEOH KEAN HUA 2,370,000 0.34
18. LINTANG EMAS SDN BHD 2,073,817 0.30
19. PAN SARAWAK HOLDINGS SDN BHD 1,959,868 0.28
20. DB (MALAYSIA) NOMINEE (ASING) SDN BHD 1,745,000 0.25 DEUTSCHE BANK AG LONDON FOR CS OPPORTUNISTIC STRATEGY LTD
21. DB (MALAYSIA) NOMINEE (ASING) SDN BHD 1,744,000 0.25 DEUTSCHE BANK AG LONDON FOR DIVERSIFIED ASIAN STRATEGIES FUND
22. UNIVERSAL TRUSTEE (MALAYSIA) BERHAD 1,600,000 0.23 SBB PREMIUM CAPITAL FUND
23. EE HOCK LEONG LAWRENCE 1,593,000 0.23
24. PERTUBUHAN KESELAMATAN SOSIAL 1,500,000 0.22
25. HSBC NOMINEES (TEMPATAN) SDN BERHAD 1,500,000 0.22 LEE RUBBER (SELANGOR) SDN BHD
26. MALAYSIA NOMINEES (ASING) SENDIRIAN BERHAD 1,500,000 0.22 OVERSEA-CHINESE BANK NOMS P/L-LEE LATEX (PTE) LTD
27. HSBC NOMINEES (ASING) SDN BHD 1,029,000 0.15 JPMORGAN INTERNATIONAL BANK-ROXTON INVESTMENTS LTD
28. QUARRY LANE SDN BHD 1,017,000 0.15
29. MALAYSIAN NATIONAL REINSURANCE BERHAD 996,000 0.14
30. HSBC NOMINEES (ASING) SDN BHD 876,900 0.13 FIDELITY INSTITUTIONAL EMERGING MARKETS FUND
TOTAL 602,012,877 86.84 44 list of properties held by the group As at 31 December 2002
No. Address Description Appro- Appro- Existing Tenure Net Book Date of (Land or ximate ximate Usage & Expiry Value Acquisi- Building) Area age of Date (RM’000) tion (sq. ft.) building (years)
EB REALTY
1 No. 7, Jalan Tun Perak 2 units of 3,374 25 Branch Freehold 1,023.7 15/7/1991 EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL 50100 Kuala Lumpur double storage. storey building.
2 No. 122, Kapit By-Pass 4 storey 1,200 10 Branch Leasehold 224.8 30/4/1985 96807 Kapit, Sarawak building. premises. (29/4/2045)
OBB REALTY
1 No. 12A, Block B, Level 2 1 unit 1,792 16 Staff Leasehold 220.5 24/5/1983 Fraser’s Hill Condominium apartment recreation. (23/05/2082) Bukit Fraser’s 49000 Pahang
EON BANK
1 Lot 171, Jalan Council 3 storey 1,740 7 Branch Leasehold 303.8 21/6/1990 95000 Bandar Sri Aman building. premises. (20/6/2050) Sarawak
2 No. 1, Jalan Sie Poi Kieng, Double 15,682 42 Residential Leasehold 228.0 9/8/1966 Sibu, Sarawak storey premises. (31/12/2916) house.
3 No. 23, Jalan Tun Abang 2 storey 2,691 36 Branch Leasehold 872.7 17/2/1966 Haji Openg, Kuching, building. premises. (5/8/2784) Sarawak
4 Ground and First Floor, 2 units 3,078 6 Branch Leasehold 1,114.0 12/1/1996 Merdeka Plaza, office space premises. (3/8/2782) Kuching, Sarawak
5 No. 21, 4 storey 3,050 41 Branch Leasehold 856.0 5/12/1964 Jalan Wong Nai Siong building. premises. (31/12/2022) Sibu, Sarawak
6 No. 3, Jalan Bandar Satu 4 storey 4,687 8 Branch Freehold 2,346.1 4/3/1997 Pusat Bandar Puchong building. premises. Puchong, Selangor 45
No. Address Description Appro- Appro- Existing Tenure Net Book Date of (Land or ximate ximate Usage & Expiry Value Acquisi- Building) Area age of Date (RM’000) tion (sq. ft.) building (years)
7 Lot 4 & 5, Jalan TMR 1 2 units 3,132 6 Branch Leasehold 855.0 17/4/1998 Taman Melaka Raya 3 storey premises. (20/3/2094) Melaka shop-office. EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL
8 No. 3/G14, 3/G15 & 3/G16 3 units of 4,141 8 Branch Leasehold 2,930.5 2/4/1997 Block 3, Api-Api Centre shoplots premises. (31/12/2086) Kota Kinabalu, Sabah
9 No. 9, Jalan Cheng Lock, 3 1/2 storey 2,199 30 For Freehold 401.6 18/9/1972 50000 Kuala Lumpur office investment. Wilayah Persekutuan building
10 No. 177, Limbok Hill Single- 6,700 30 For Freehold 19.5 16/8/1972 Seremban storey investment. Negeri Sembilan detached house
11 No. 1, Jalan Hang Lekiu, 21 Storey 21,108 8 Training Freehold 43,102.2 24/1/1996 50100 Kuala Lumpur office Centre Wilayah Persekutuan building. - (2 floors) Branch premises (4 floors) Vacant - 15 floors
12 No. J09-06 and J02-06 2 units 2,088 7 Staff Leasehold 306.4 21/4/1994 Paradise Lagoon Holiday apartment. recreation. (6/7/2087) Apartment Batu 3 1/2, Jalan Pantai 70100 Port Dickson Negeri Sembilan
13 No. C05-07 1 unit 1,029 4 Staff Freehold 259.0 2/9/1996 Genting Permai Park & apartment. recreation. Resort, 6th Mile 69000 Genting Highland Pahang 46 list of properties held by the group { continued }
No. Address Description Appro- Appro- Existing Tenure Net Book Date of (Land or ximate ximate Usage & Expiry Value Acquisi- Building) Area age of Date (RM’000) tion (sq. ft.) building (years)
14 No. 21 & 23 2 units of 5,090 1 Branch Freehold 1,960.1 27/5/2002 Jalan Indah 15/1 3 storey premises. Bukit Indah shop office. EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL 81200 Johor Bahru Johor
15 Lot No. 2013 3 storey 1,390 10 Branch Leasehold 1 23/9/1992 Jalan Pisang Barat building. storage. (31/12/2038) Kuching
16 No. 41, Brooke Drive 16 3 storey 1,599 10 Branch Leasehold 1 08/10/1992 Rejang Park, 96000 Sibu building. premises (31/12/2031)
EON FINANCE
1 No.80, Jalan Market 5 storey 1,400 30 Branch Leasehold 526.6 07/3/1991 96007 Sibu shop-house premises (31/12/2029)
2 No.1, Jln SS15/4E 3 storey 3,261 21 Branch Freehold 525.7 12/2/1991 47500 Subang Jaya, shop-house premises Petaling Jaya, Selangor
3 No.32 & 34, Jln 21/19 2 storey 3,080 40 Branch Freehold 2,329.7 19/8/1997 46300 Petaling Jaya terrace premises Selangor shop- houses
4 No.1, Jalan Goh Hock Huat 41/2 storey 2,776 20 Branch Freehold 1,946.1 7/9/1998 41400 Klang shop-house premises Selangor
5 B-278 & B-280 4 storey 3,208 4 Branch Freehold 1,822.0 8/4/1999 Jalan Beserah shop-house premises 25300 Kuantan Pahang
6 No.26 & 27 31/2 storey 3,600 7 Branch Freehold 1,847.5 22/1/1999 Jalan Kenari 1 shop-house premises Bandar Puchong Jaya 47100 Puchong Selangor 47
No. Address Description Appro- Appro- Existing Tenure Net Book Date of (Land or ximate ximate Usage & Expiry Value Acquisi- Building) Area age of Date (RM’000) tion (sq. ft.) building (years)
7 No. 21, Jalan Permas 10/1 4 storey 2,624 6 Branch Freehold 1,371.7 4/5/1999 Bandar Baru Permas Jaya shop-house premises 81750 Masai, EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Johor
8 No. 67 & 69 3 storey 3,080 8 Branch Leasehold 900.0 15/8/1999 Jalan Merdeka shop-house premises (07/07/2093) 75000 Taman Merdeka Raya, Melaka
9 No.26 & 27 3 storey 2,800 6 Branch Freehold 761.9 3/9/1999 Jalan Permatang Gedong terrace premises Taman Sejati Indah shoplot 08000 Sungai Petani, Kedah
10 S-3, Kompleks Negeri 3 storey 1,680 19 Branch Leasehold 517.6 29/6/1981 Jalan Dr. Krishnan shop-house Storage (30/01/2078) 70000 Seremban place Negeri Sembilan 48 group corporate directory
PERLIS
KEDAH EON BANK BERHAD
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL EON FINANCE BERHAD
PULAU PINANG KELANTAN MALAYSIAN INTERNATIONAL TERENGGANU MERCHANT BANKERS BERHAD PERAK
ONE STOP BANKING
FULL ISLAMIC BANKING
PAHANG
SELANGOR
KUALA LUMPUR NEGERI SEMBILAN
MELAKA JOHOR
SABAH
SARAWAK 49
12th Floor, Wisma Cyclecarri, 288, Jalan Raja Laut 50350 Kuala Lumpur
HEAD OFFICE Telephone : 03-2694 1188 2002 BERHAD • ANNUAL REPORT EON CAPITAL Facsimile : 03-2694 9588 Website : www.eonbank.com.my
REGIONAL OFFICES Inanam (INM) Kapit (KPI) Lot 11 & 12, Inanam Plaza 122, Kapit By Pass EAST MALAYSIA Lrg Inanam Plaza P.O. Box 15 Kapit General Line : 082-230 788 88450 Kota Kinabalu Telephone : 084-796 413 Fax Line : 082-251 488 Telephone : 088-437 601 Facsimile : 084-796 939 Facsimile : 088-437 596 NORTHERN REGION Kuching (KCH) General Line : 04-226 5388 Tawau (TWU) Lot 619 - 623, Ground Floor Fax Line : 04-228 2145 TB-318, Blok 37 Jalan Padungan Fajar Commercial Complex 93100 Kuching EAST COAST REGION 91000 Tawau Telephone : 082-420 101 General Line : 09-623 6288 Telephone : 089-755 386 Facsimile : 082-246 010 Facsimile : 089-755 391 SELANGOR REGION Kuching (KUC) General Line : 03-3343 6488 SARAWAK Lot 230 & 231, Seksyen 49 Fax Line : 03-3343 1488 Jalan Abell, 93746 Kuching Bandar Sri Aman (SGG) Telephone : 082-243 621 BRANCHES DIRECTORY Lot 171, Jalan Council Facsimile : 082-420 229 95000 Bandar Sri Aman SABAH Telephone : 083-322 117 Limbang (LMN) Facsimile : 083-320 512 49A, Buangsiol Road Kota Kinabalu (BKI) P.O. Box 69, 98707 Limbang Lot 3-0-14 to 3-0-16 Bintulu (BTU) Telephone : 085-212 097 Block 3, Lrg. Api-Api 2 153 & 155 Facsimile : 085-212 897 Api-Api Centre, 88000 Kota Kinabalu Jalan Masjid, Taman Sri Dagang Telephone : 088-247 688 97997 Bintulu Miri (MYY) Facsimile : 088-246 327 Telephone : 086-312 941 G & 1st Floor, Lot 715 Merbau Road Facsimile : 086-313 617 98008 Miri Kota Kinabalu (KKU) Telephone : 085-415 371 8, Jalan Pantai, Locked Bag No. 124 Central Park (CPB) Facsimile : 085-411 176 88999 Kota Kinabalu 345-347, Central Park Telephone : 088-214 733 Commercial Centre, 3rd mile Rejang Park (RJP) Facsimile : 088-233134 Jalan Tun Ahmad Zaidi Adruce 41, Brooke Drive 16, Rejang Park 93200 Kuching 96000 Sibu Telephone : 082-254 224 Telephone : 084-321 463 Facsimile : 082-243 618 Facsimile : 084-320 561 50 group corporate directory { continued }
Sibu (SBW) Jalan Tun Razak (JTR) Taman Sungai Besi (TSB) No. 10-18, Mission Road Ground Floor, Wisma SHL 38, Jalan 7/108C 96000 Sibu Jalan Tun Razak Jalan Sungai Besi Telephone : 084-322 188 50400 Kuala Lumpur Taman Sungai Besi Facsimile : 084-313 177 Telephone : 03-2163 1457 57100 Kuala Lumpur Facsimile : 03-2163 1469 Telephone : 03-7980 0747 FEDERAL TERRITORY Facsimile : 03-7980 3652
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Kepong (KPG) Kuala Lumpur Main (KLM) 60, Jalan Dua Kepong Baru Wangsa Maju (WMJ) Ground Floor, Wisma Cyclecarri 52100 Kuala Lumpur 10, Jalan 1/27B, Sek 1 No. 288 Jalan Raja Laut Telephone : 03-6258 5931 Bandar Baru Wangsa Maju 50350 Kuala Lumpur Facsimile : 03-6251 4855 53300 Kuala Lumpur Telephone : 03-2694 2288 Telephone : 03-4142 2989 Facsimile : 03-2694 7588 Pandan Jaya (PDN) Facsimile : 03-4142 2930 13G - 17G, Jalan Pandan 3/6 Bandar Park (BPK) Pandan Jaya, Cheras Maju Junction (MJM) 152, Jalan Mega Mendung 55100 Kuala Lumpur LG 08 & 09 Kompleks Bandar Batu 5 Telephone : 03-9283 7988 Lower Ground Off Jalan Kelang Lama Facsimile : 03-9282 9788 Maju Junction Mall 58000 Kuala Lumpur No 1001, Jalan Sultan Ismail Telephone : 03-7982 9400 Segambut (SGB) 50250 Kuala Lumpur Facsimile : 03-7981 5824 36-38, Jln Segambut Utara Telephone : 03-2694 7688 51200 Kuala Lumpur Facsimile : 03-2694 4588 Bangsar Baru (BSR) Telephone : 03-6252 3598 38 & 40, Jalan Telawi Facsimile : 03-6252 3606 Putrajaya (PTJ) Bangsar Baru Tingkat Bawah, Lot T00-U01 59000 Kuala Lumpur Selayang (SLY) No. 5, Jalan P16 Precinct 16 Telephone : 03-2283 6288 166 - 168 Jalan 2/3A 62150 Putrajaya Facsimile : 03-2283 1288 Off KM 12 Jalan Ipoh Telephone : 03-8888 2188 68100 Batu Caves, Kuala Lumpur Facsimile : 03-8888 7288 Brickfields (BKF) Telephone : 03-6138 8988 150, Jalan Tun Sambanthan Facsimile : 03-6136 0388 SELANGOR DARUL EHSAN 50470 Kuala Lumpur Telephone : 03-2274 7100 Sri Hartamas (TSH) Balakong (BKG) Facsimile : 03-2274 9568 2 & 8, Jalan Sri Hartamas S-7, Jalan 1/6, Taman Indah 50490 Kuala Lumpur Batu 11, Jalan Balakong Bukit Bintang (BBB) Telephone : 03-6201 2743 43200 Cheras Ground Floor, Wisma KLIH Facsimile : 03-6201 2751 Telephone : 03-9074 4205 126, Bukit Bintang Facsimile : 03-9074 7194 55100 Kuala Lumpur Taman Cheras Indah (TCI) Telephone : 03-2148 8077 Ground Floor Bandar Baru Ampang (APG) Facsimile : 03-2148 3488 Wisma Dergahayu 2-G & 4-G 26, Jalan Indah 23 Jalan Wawasan Ampang 2/4 Jalan Hang Lekiu (HQB) Taman Cheras Indah Bandar Baru Ampang Ground, Mezzanine &1st Floor 56100 Kuala Lumpur 68000 Ampang No. 1, Jalan Hang Lekiu Telephone : 03-9282 7058 Telephone : 03-4296 3488 55100 Kuala Lumpur Facsimile : 03-9282 0043 Facsimile : 03-4295 0988 Telephone : 03-2032 4700 Facsimile : 03-2031 9537 51
Bandar Sungai Long (SLG) Puchong (PCH) KEDAH DARUL AMAN 5, Jalan SL 1/4 3, Jalan Bandar Satu Bandar Sungai Long Pusat Bandar Puchong Alor Setar (AST) 43000 Kajang 47100 Puchong 1546, Jalan Sultan Badlishah Telephone : 03-9074 9950 Telephone : 03-5882 4388 05000 Alor Setar Facsimile : 03-9075 0902 Facsimile : 03-8075 1433 Telephone : 04-734 6988 Facsimile : 04-734 4988 Kajang (KJG) Rawang (RWG) EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL 36, Jalan Sulaiman 17 & 19, Jalan Bandar Rawang 5 Alor Setar (ASR) 43000 Kajang 48000 Rawang 26 & 28, G&1st Floor Telephone : 03-8734 1093 Telephone : 03-6093 5288 Jalan Putera Facsimile : 03-8734 2082 Facsimile : 03-6093 5388 05100 Alor Setar. Telephone : 04-730 6461 Klang (KLA) Seri Kembangan (SKM) Facsimile : 04-730 6458 No. 26-32, Jalan Kapar 1501, A-G Jalan Besar 41400 Klang 43300 Sri Kembangan Gurun (GRN) Telephone : 03-3343 1188 Telephone : 03-8943 6788 18K, Jalan Raya Facsimile : 03-3343 2988 Facsimile : 03-8943 9088 08300 Gurun Telephone : 04-468 4785 Pandamaran (PMN) Shah Alam (SHM) Facsimile : 04-468 4766 268, Jalan Bukit Unjur 7 34, Jalan Perbahan Satu Bayu Perdana Seksyen 26/2A Sungai Petani (SPT) 41200 Klang 40000 Shah Alam 22 & 23, Jalan Permatang Gedong Telephone : 03-3324 3303 Telephone : 03-5191 8888 Taman Sejati Indah Facsimile : 03-3324 3305 Facsimile : 03-5191 6298 08000 Sungai Petani Telephone : 04-431 0588 PJ New Town (PJA) SS2, Petaling Jaya (SS2) Facsimile : 04-431 0488 2, Jalan 52/10 2, Jalan SS2/61 Petaling Jaya New Town Centre 47300 Petaling Jaya Sungai Petani (SPI) 46200 Petaling Jaya Telephone : 03-7877 6800 Lot 525B-C, Jalan Kuala Ketil Telephone : 03-7958 6488 Facsimile : 03-7877 6686 08000 Sungai Petani. Facsimile : 03-7957 1405 Telephone : 04-422 4352 USJ (USJ) Facsimile : 04-422 4355 PJ Old Town (PJO) Lot 43, Jalan USJ10/14 86A, Jalan Othman 47500 Subang Jaya PULAU PINANG 46000 Petaling Jaya Petaling Jaya Telephone : 03-7785 2904 Telephone : 03-5637 1984 Bukit Jambul (BJL) Facsimile : 03-7785 3250 Facsimile : 03-5637 1989 10A, Jalan Rumbia Pusat Perniagaan Bukit Jambul Port Klang (PKG) Sungai Buloh (BUL) 11900 Bayan Lepas 90, Persiaran Raja Muda Musa 51 & 53, Jalan TSB 10A Telephone : 04-642 4851 42000 Pelabuhan Klang Taman Industri Sungai Buloh Facsimile : 04-642 7807 Telephone : 03-3166 1188 47000 Sungai Buloh Facsimile : 03-3167 1488 Telephone : 03-6157 5811 Bukit Mertajam (BMJ) Facsimile : 03-6157 5812 62 & 63, Jalan Aston 14000 Bukit Mertajam Telephone : 04-538 1549 Facsimile : 04-539 8466 52 group corporate directory { continued }
Butterworth (BTW) Jelutong (JLG) Nilai (NLI) 4962 & 4963, Jalan Chain Ferry No. 300, Jalan Jelutong PTD 7463, Jalan BBN 1/1A Seberang Prai Utara 11600 Pulau Pinang Putra Point 1, Bandar Baru Nilai 12000 Butterworth Telephone : 04-282 6688 71800 Nilai Telephone : 04-324 3288 Facsimile : 04-281 9650 Telephone : 06-850 0668 Facsimile : 04-324 8288 Facsimile : 06-850 0667 PERAK DARUL RIDZUAN
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Prai (PRA) Seremban (SMB) 37, Tingkat Kikik 7 Ayer Tawar (ATW) Ground Floor, Wisma UMNO Taman Inderawasih 86 & 88, Jalan Besar Jalan Dato Sheikh Ahmad 13600 Prai. 32400 Ayer Tawar 70000 Seremban Telephone : 04-399 3134 Telephone : 05-672 7470 Telephone : 06-762 8566 Facsimile : 04-390 6913 Facsimile : 05-672 7478 Facsimile : 06-762 6445
Pulau Pinang (PEN) Ipoh (IPO) MELAKA Ground Floor, Wisma Wang, 251-A No. 44 & 48, Persiaran Greentown 1 Jalan Burma Greentown Business Centre Melaka (MLK) 10350 Pulau Pinang 30450 Ipoh 105 & 107, Jalan TMR Telephone : 04-229 6288 Telephone : 05-255 7688 Taman Melaka Raya Facsimile : 04-229 7288 Facsimile : 05-255 5788 75000 Melaka Telephone : 06-281 2688 Pulau Pinang (PNG) Langkap (LKP) Facsimile : 06-281 2588 Ground Floor, Bangunan FOP Lot 63, Jalan Chui Chak 123, Jalan Anson 36700 Langkap Melaka (MLA) 10400 Pulau Pinang Telephone : 05-659 2840 Ground Floor, Bangunan Graha Maju Telephone : 04-226 4177 Facsimile : 05-659 2843 Lot 315, Jalan Graha Maju Facsimile : 04-226 3946 75300 Melaka Parit Buntar (PBR) Telephone : 06-283 8229 Seberang Jaya (SJA) Lot 75, Jalan Maharaja Facsimile : 06-283 6795 33, Jalan Todak 2 Pusat Bandar Baru Pusat Bandar Seberang Jaya 34200 Parit Buntar Batu Berendam (BBD) 13700 Seberang Jaya Telephone : 05-716 8766 Lot BB-371A & B, Taman Melaka Baru Telephone : 04-397 1129 Facsimile : 05-716 8771 Batu Berendam, 75350 Melaka Facsimile : 04-397 1136 Telephone : 06-317 3235 Simpang Pulai (SPP) Facsimile : 06-317 2660 Sungai Bakap (SBK) 738 & 740, Jalan Gopeng 1435 & 1436, Jalan Besar Taman Chandan Desa Masjid Tanah (MJT) 14200 Sungai Bakap Simpang Pulai, 31300 Ipoh Lot 215 & 310, Jalan Besar Seberang Prai Selatan Telephone : 05-357 5073 78300 Masjid Tanah Telephone : 04-582 1134 Facsimile : 05 -357 5077 Telephone : 06-384 7137 Facsimile : 04-582 5826 Facsimile : 06-384 7232 NEGERI SEMBILAN DARUL KHUSUS Sungai Dua (SGD) 32 & 34, Lorong Murni 10 Lukut (LKT) Taman Desa Murni Lot 3120 & 3121, Jalan Besar Sungai Dua, 13800 Butterworth Lukut, 71010 Port Dickson Telephone : 04-356 2688 Telephone : 06-651 1878 Facsimile : 04-356 5288 Facsimile : 06-651 1900 53
JOHOR DARUL TAKZIM Senai (SNI) Kuala Terengganu (KTU) 1-1A-1B & 1C, 38 Jalan Belimbing 15, Jalan Batas Baru Bukit Indah (BIN) 81400 Senai 20300 Kuala Terengganu 21 & 23, Jalan Indah 15/1 Telephone : 07-599 4598 Telephone : 09-622 7701 Bukit Indah Facsimile : 07-599 4231 Facsimile : 09-622 1337 81200 Johor Bahru Telephone : 07-239 1388 Taman Pelangi (TPI) KELANTAN DARUL NAIM
Facsimile : 07-232 5988 12, Jalan Serampang, Taman Pelangi 2002 BERHAD • ANNUAL REPORT EON CAPITAL 80050 Johor Bahru Kota Bharu (KBH) Batu Pahat (BPT) Telephone : 07-332 1323 PT 174 & 175 9 - 11, Jalan Kundang Facsimile : 07-332 5841 Blok C, Jalan Parit Dalam Taman Bukit Pasir Seksyen 8 83000 Batu Pahat Tampoi (TMP) 15000 Kota Bharu Telephone : 07-433 7488 1 & 3, Jalan Persiaran Tanjung Susur Telephone : 09-743 8188 Facsimile : 07-434 1488 Taman Bukit Alif, Tampoi Facsimile : 09-743 6188 81200 Johor Bahru Desa Cemerlang (DCM) Telephone : 07-235 5930 Kota Bharu (KBU) 37 & 39, Jalan Johar 1 Facsimile : 07-235 5927 Ground & Mezzanine Floor Taman Desa Cemerlang Bangunan Hotel Anda 81800 Ulu Tiram PAHANG DARUL MAKMUR 2529, Jalan Kebun Sultan Telephone : 07-861 7488 15350 Kota Bharu Facsimile : 07-861 4588 Kuantan (KTN) Telephone : 09-747 0790 A-127, Lorong Tun Ismail 16 Facsimile : 09-747 0833 Gelang Patah (GPH) Sri Dagangan Kuantan, 25000 Kuantan 14, Jalan Besar Telephone : 09-513 1888 Puchong Recovery Centre 81550 Gelang Patah Facsimile : 09-514 6688 Telephone : 03-8075 5659 Telephone : 07-510 4188 Facsimile : 07-510 4088 Kuantan (KNT) Training Centre (OBB Bldg) 5, Jalan Bukit Ubi 26 Telephone : 03-2076 5659 Johor Bahru (JBU) 25200 Kuantan Facsimile : 03-2026 1022 Ground Floor, Asia Life Bldg Telephone : 09-514 3377 33, Jalan Segget Facsimile : 09-513 6733 OBB Bldg 80000 Johor Bahru Telephone : 03-2032 4600 Telephone : 07-223 5488 Mentakab (MTB) Facsimile : 07-224 3488 (Opening on 17 February 2003) Butterworth BPC (E) 119 & 121, Jalan Temerloh Telephone : 04-310 4488 Masai (MAS) 28400 Mentakab Facsimile : 04-310 4466 105 & 106, Jalan Besar Telephone : 09-277 0400 81750 Masai Facsimile : 09-277 9929 Tampoi BPC (E) Telephone : 07-252 2960 Telephone : 07-239 1688 Facsimile : 07-252 2963 TERENGGANU DARUL IMAN Facsimile : 07-239 1788
Pasir Gudang (PGG) Kuala Terengganu (KTG) 30, Jalan Mawar 1, Taman Mawar Ground Floor 81700 Pasir Gudang Menara Yayasan Islam Terengganu Telephone : 07-252 2740 Jalan Sultan Omar Facsimile : 07-252 2723 20300 Kuala Terengganu Telephone : 09-623 6288 Facsimile : 09-622 6588 54 group corporate directory { continued }
11th Floor, Wisma Cyclecarri, 288, Jalan Raja Laut 50350 Kuala Lumpur
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL HEAD OFFICE Telephone : 03-2694 8888 Facsimile : 03-2694 5876 Website : www.eonfin.com.my
FEDERAL TERRITORY SELANGOR DARUL EHSAN Subang Jaya (SJ) No. 1, Jalan SS15/4E UOA Centre (UOA) Klang (KLG) City Centre Subang Jaya Lot 19A-1-1, UOA Centre, Level 1 No. 1, Jalan Goh Hock Huat 47500 Subang Jaya. No. 19 Jalan Pinang 41400 Klang Telephone : 03-5633 2516 50450 Kuala Lumpur Telephone : 03-3341 1050 Facsimile : 03-5634 8161 Telephone : 03-2164 6451 Facsimile : 03-3341 0703 Facsimile : 03-2164 6454 PERLIS INDERA KAYANGAN Petaling Jaya (PJ) Jalan Raja Laut (JRL) 32 & 34, Jalan 21/19 Kangar (KGR) G2.01 - G2.02, Ground Floor SEA Park No. 10E, Lot 17 Wisma Cyclecarri 46300 Petaling Jaya Jalan Raja Syed Alwi No.288, Jalan Raja Laut Telephone : 03-7874 5968 01000 Kangar 50350 Kuala Lumpur Facsimile : 03-7874 5488 Telephone : 04-977 3392 Telephone : 03-2694 8229 Facsimile : 04-977 3396 Facsimile : 03-2694 8519 Puchong Jaya (PCH) 26 & 27, Jalan Kenari 1 KEDAH DARUL AMAN Kepong (KPG) Bandar Puchong Jaya No. 3, Ground Floor, Jalan 2/32 47100 Puchong Langkawi (LKW) Off Jalan Kepong, 6th mile Telephone : 03-5882 7100 No. 33, Kelana Mas 52000 Kuala Lumpur Facsimile : 03-5882 7116 07000 Kuah, Langkawi Telephone : 03-6257 1870 Telephone : 04-966 8118 Facsimile : 03-6251 4631 Serendah (SRD) Facsimile : 04-966 8228 No. 5&7, Jalan Chempaka 1 Setapak (STP) Taman Chempaka Sungai Petani (SP) No. 46, Jalan 2/23A 48200 Serendah, Hulu Selangor 26 & 27, Jalan Permatang Gedong Taman Danau Kota Telephone : 03-6081 3182 Taman Sejati Indah 53000 Kuala Lumpur Facsimile : 03-6081 3186 08000 Sungai Petani Telephone : 03-4143 9580 Telephone : 04-431 2288 Facsimile : 03-4143 9594 Shah Alam (SHM) Facsimile : 04-431 1627 No. 10, Jalan Tuanku Ampuan Taman Midah Cheras (TM) Zabedah D9/D, Seksyen 9 No. 15, 16 & 17, Jalan Midah Satu 40100 Shah Alam Taman Midah Cheras Telephone : 03-5512 9888 56000 Kuala Lumpur Facsimile : 03-5512 9889 Telephone : 03-9131 9388 Facsimile : 03-9132 6388 55
PULAU PINANG PERAK DARUL RIDZUAN MELAKA
Bandar Baru Ayer Itam 1 (AIT) Ipoh (IPH) Melaka (MLK) No. 71-A-B-C, Lintang Angsana No. 56 & 58 No. 67 & 69, Jalan Merdeka Bandar Baru Ayer Itam Jalan Kamaruddin Isa Taman Melaka Raya 11500 Pulau Pinang 31400 Ipoh, Perak 75000 Melaka Telephone : 04-827 1688 Telephone : 05-547 4203 Telephone : 06-283 7675
Facsimile : 04-827 1632 Facsimile : 05-547 2777 Facsimile : 06-284 1151 2002 BERHAD • ANNUAL REPORT EON CAPITAL
Bayan Baru (BYB) Sitiawan (STW) Malim Jaya (ML2) No. 58 & 60, Taman Sri Tunas No. 33 & 34 No. 26, Jalan Suria Dua Jalan Tengah Taman Sentosa, Jalan Lumut Taman Malim Jaya Bandar Bayan Baru 32000 Setiawan 75250 Melaka 11950 Bayan Lepas Telephone : 05-691 9988 Telephone : 06-334 2173 Telephone : 04-645 2881 Facsimile : 05-691 8988 Facsimile : 06-337 3188 Facsimile : 04-645 2995 Tanjung Malim (TGM) JOHOR DARUL TAKZIM Bukit Mertajam (BMJ) No. 5, Jalan Chong Ah Peng No. 11 & 11A 35900 Tanjung Malim Bandar Baru Permas Jaya (PMS) Lorong Usahaniaga Satu Telephone : 05-459 8272 No. 21, Jalan Permas 10/1 Taman Usahaniaga Facsimile : 05-458 3178 Bandar Baru Permas Jaya 14000 Bukit Mertajam 81750 Masai Telephone : 04-537 0745 Kamunting (KMT) Telephone : 07-387 1828 Facsimile : 04-537 0752 No. 396 & 398 Facsimile : 07-387 5330 Taman Saujana Jalan Burmah (PNG) 34600 Kamunting, Taiping Bandar Baru Uda (UDA) No. 421 & 423, Jalan Burmah Telephone : 05-807 8915 No. 70, Jalan Padi Satu 10350 Pulau Pinang Facsimile : 05-807 8905 Bandar Baru Uda Telephone : 04-228 3202 81200 Tampoi, Johor Bahru Facsimile : 04-228 1654 NEGERI SEMBILAN DARUL KHUSUS Telephone : 07-234 0309 Facsimile : 07-234 0363 Nibong Tebal (NT) Seremban 1 (SBN) No. 52 & 54 No. 120 & 121 Muar (MUR) Jalan Besar Air Lintas Jalan Dato’ Bandar Tunggal No. 55-2 & 55-3 Taman Merbah 70000 Seremban Jalan Bentayan 14300 Nibong Tebal Telephone : 06-761 7075 84000 Muar Telephone : 04-593 8988 Facsimile : 06-761 7078 Telephone : 06-954 2888 Facsimile : 04-593 7988 Facsimile : 06-954 8333 Nilai (NLI) Prai (PRI) Lot PT 5730, Jalan TS 2/1D Pontian (PTN) No. 7 & 9, Tingkat 7 Taman Semarak No. 188, Jalan Bakek Taman Inderawasih 71800 Nilai 82000 Pontian 13600 Prai Telephone : 06-799 5289 Telephone : 07-687 5002 Telephone : 04-398 0286 Facsimile : 06-799 5292 Facsimile : 07-687 4998 Facsimile : 04-398 0204 56 group corporate directory { continued }
Segamat (SGT) TERENGGANU DARUL IMAN Tawau (TWU) No. A-1 & A-1-1 TB 4282 - TB 4285 Jalan Genuang Kuala Terengganu (KTG) Jalan Haji Karim Taman Tan Leng Ann No. 38A & 38B 91000 Tawau 85000 Segamat Ground & Mezzanine Floor Telephone : 089-779 441 Telephone : 07-943 3650 Jalan Tok Lam Facsimile : 089-763 899 Facsimile : 07-943 3560 20100 Kuala Terengganu
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Telephone : 09-624 2505 SARAWAK Taman Abad 1 (TAB) Facsimile : 09-624 2372 No. 20-21, Jalan Harimau Tarum Kuching 2 (KC2) Taman Abad KELANTAN DARUL NAIM No. 293, Lot 2654 80250 Johor Bahru Central Park Commercial Centre Telephone : 07-331 1421 Kota Bharu (KB) 3rd Mile, Rock Road Facsimile : 07-331 1409 PT No. 321, Seksyen 25 93250 Kuching Jalan Sultan Yahya Petra Telephone : 082-413 773 Taman Molek (TMO) 15200 Kota Bharu Facsimile : 082-410 880 No. 29 & 31, Jalan Molek 2/4 Telephone : 09-748 6888 Taman Molek Facsimile : 09-748 6288 Krokop (KRP) 81100 Johor Bahru Lot 2499 & 2500, Ground Floor Telephone : 07-353 7003 SABAH Boulevard Commercial Centre Facsimile : 07-353 6997 Jalan Miri-Pujut, Km 3 Kota Kinabalu 1 (KK) 98000 Miri Yong Peng (YPG) Lot 3 & 4, Block 2 Telephone : 085-424 521 No. 242 & 244, Jalan Besar Api-Api Centre, Phase 1A Facsimile : 085-424 520 Taman Sembrong Baru Jalan Centre Point 83700 Yong Peng 88000 Kota Kinabalu Kuching (KCH) Telephone : 07-467 4850 Telephone : 088-263 320 Lot 122 & 123 Facsimile : 07-467 3170 Facsimile : 088-263 315 Jalan Song Thian Cheok 93100 Kuching Kulai (KLI) Sandakan (SDK) Telephone : 082-246 661 No. 2 & 3, Jalan Anggerik 1 Lot 46 & 47, Bandar Pasaraya Facsimile : 082-414 446 Taman Kulai Utama Mile 4, Jalan Utara 81000 Kulai 90000 Sandakan Sibu (SBW) Telephone : 07-662 6388 Telephone : 089-222 202 No. 10-18, Mission Road Facsimile : 07-662 6366 Facsimile : 089-222 209 96000 Sibu Telephone : 084-322 188 PAHANG DARUL MAKMUR Lahad Datu (LHD) Facsimile : 084-313 177 MDLD 4712, Lot 4 Kuantan (KTN) Jalan Kastam Lama Sri Aman (SA) B278 & B280, Jalan Beserah 91100 Lahad Datu Ground Floor 25300 Kuantan Telephone : 089-884 488 175, Council Road Telephone : 09-566 4100 Facsimile : 089-884 848 95000 Sri Aman Facsimile : 09-566 4800 Telephone : 083-320 599 Facsimile : 083-320 601 57
MALAYSIAN INTERNATIONAL MERCHANT BANKERS BERHAD EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL 21st Floor, Wisma Cyclecarri, 288, Jalan Raja Laut 50350 Kuala Lumpur HEAD OFFICE Telephone : 03-2691 0200 (10 Lines) Facsimile : 03-2698 5388/2692 7488 Website : www.eonbank.com.my
PULAU PINANG
Tingkat 4, Wisma Leader 8, Jalan Larut, 10050 Pulau Pinang Peti Surat 789, 10800 Pulau Pinang Telephone : 03-2283 021 Facsimile : 03-2288 192 58 EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Annual Report 2002
reports and financial statements
Directors’ Report 60
Statement by Directors 67
Statutory Declaration 67
Report of the Auditors 68
Balance Sheets 69
Income Statements 70
Statements of Changes in Equity 71
Cash Flow Statements 73
Summary of Significant Accounting Policies 75
Notes to the Financial Statements 81 60 directors’ report
The Directors have pleasure in submitting their report to the members together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2002.
The financial results of the Group for the financial year incorporates the one month consolidated results of EON Bank Berhad and its subsidiary companies. EON Bank Berhad became a wholly-owned subsidiary company of the Company on 2 December 2002 pursuant to the Corporate Exercise as disclosed in this report and Note 35 to the financial statements. EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL PRINCIPAL ACTIVITIES During the financial year, the Company commenced its operations as an investment holding company upon the acquisition of EON Bank Berhad as disclosed in Note 35 to the financial statements. The Group is involved in commercial banking, merchant banking, finance company business and nominee and custodian services.
The principal activities of the subsidiaries are as stated in Note 10 to the financial statements.
FINANCIAL RESULTS
Group Company RM’000 RM’000
Profit/(loss) before taxation and zakat 37,268 ( 1,301 )
Taxation ( 13,192 ) ( 40 )
Zakat ( 328 ) -
Net profit/(loss) for the financial year 23,748 ( 1,341 )
The financial results of the Group reflects inclusion of results of EON Bank Berhad group from the date of acquisition, i.e 2 December 2002 to 31 December 2002.
DIVIDENDS No dividend has been paid or declared by the Company since the end of the previous financial year.
The Directors do not recommend the payment of any dividend in respect of the financial year ended 31 December 2002.
RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the financial statements and notes to the financial statements. 61
SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR On 21 January 2002, Edaran Otomobil Nasional Berhad (‘EON Berhad’) together with Kedah Cement Holdings Berhad (‘KCHB’), Malayan Cement Berhad (‘MCB’), EON Bank Berhad (‘EBB’) and EON Capital Berhad (‘ECB’) had entered into a conditional agreement in relation to the Corporate Exercise to facilitate the listing of EON Bank Group through ECB. The Corporate Exercise was completed as at the date of this report.
The Corporate Exercise comprised the following: EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL (a) KCHB Scheme of Arrangement Pursuant to the KCHB Scheme of Arrangement between KCHB and its shareholders under Section 176 of the Companies Act, 1965, ECB allotted and issued 94,787,685 ordinary shares of RM1 each to the KCHB Minority Shareholders on the basis of one new ECB share for every one KCHB share originally held by the KCHB Minority Shareholders. The total cash consideration of RM216,683,488 for the issuance of ordinary shares was fully paid-up by MCB.
(b) EBB Scheme of Arrangement Pursuant to the EBB Scheme of Arrangement and Amalgamation between EBB and its shareholders under Section 176 of the Companies Act, 1965, EBB shares were transferred and vested in ECB for a total consideration of RM2,011,000,000. The total consideration was satisfied partly by issuance of 598,411,047 new ECB ordinary shares at an issue price of RM2.58 per ordinary share and the balance via cash consideration of RM467,099,444. The cash consideration was financed via issuance of RM300 million nominal value of secured fixed rate bonds, at a discount and proceeds from the payment made by MCB as mentioned in paragraph (a) above.
(c) Transfer of Listing Status On completion of the above schemes, KCHB’s Listing Status on the Main Board of the Kuala Lumpur Stock Exchange (‘KLSE’) was transferred to ECB and, consequently KCHB was delisted from the Official List of the Main Board of the KLSE.
(d) Proposed Offer by EON Berhad As EON Berhad effectively held 322,944,403 of ECB shares, representing 46.59% of the total equity interest in ECB upon the completion of the above schemes, EON Berhad was required to extend a conditional mandatory offer for the 10,000 ECB shares held by the Subscriber Shareholders of ECB prior to the KCHB Scheme of Arrangement and the 94,787,685 ECB shares held by the KCHB Minority Shareholders, at a cash offer price of RM2.67 per ECB share, pursuant to the Malaysian Code on Take-Over and Mergers. The proposed offer closed on 28 January 2003 with the result that EON Berhad now holds 50.09% interest in ECB. 62 directors’ report { continued }
ISSUE OF SHARES During the financial year, the Company increased its authorised share capital from RM100,000 comprising 100,000 ordinary shares of RM1 each to RM2,000,000,000 comprising 2,000,000,000 ordinary shares of RM1 each by creation of an additional 1,999,900,000 ordinary shares of RM1 each.
Upon completion of the Corporate Exercise, the issued and paid-up ordinary share capital of the Company was increased from RM2 to RM693,208,732 by the issue of 693,208,730 fully paid up ordinary shares of RM1.00 each. EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL RM’000
As at 1 January 2002 -* Number of shares issued in respect of non renounceable rights issue** 10 Number of shares issued pursuant to KCHB Scheme of Arrangement 94,788 Number of shares issued pursuant to EBB Scheme of Arrangement 598,411
As at 31 December 2002 693,209
* denotes RM2
** The Non Renounceable Rights Shares were issued at RM1.20 per ordinary share to the Subscriber Shareholders of the Company. The issuance was made to finance the working capital of the Company.
The newly issued ordinary shares rank pari passu in all respects with the existing ordinary shares of the Company.
With effect from 23 December 2002, the entire issued and paid up ordinary shares of the Company were listed and quoted on the Main Board of the Kuala Lumpur Stock Exchange.
ISSUE OF DEBENTURES During the financial year, the Company issued RM300 million nominal amount of secured fixed rate bonds in three tranches with maturity tenure of three, five and seven years at 5.25%, 6.00% and 6.75% respectively. The main features of these bonds are disclosed in Note 16 to the financial statements.
These bonds were issued at a discount and the net proceeds arising from the issuance of these bonds were utilised to part finance the cash consideration arising from the acquisition of EBB shares pursuant to the EBB Scheme of Arrangement.
BAD AND DOUBTFUL DEBTS AND FINANCING Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that action had been taken in relation to the writing off of bad debts and financing and the making of provisions for doubtful debts and financing, and satisfied themselves that all known bad debts and financing had been written off and adequate provisions made for bad and doubtful debts and financing.
At the date of this report, the Directors are not aware of any circumstances which would render the amount written off for bad debts and financing, or the amount of the provision for doubtful debts and financing, in the financial statements of the Group and of the Company inadequate to any substantial extent. 63
CURRENT ASSETS Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that any current assets, other than debts and financing, which were unlikely to be realised in the ordinary course of business, their values as shown in the accounting records of the Group and of the Company have been written down to an amount which they might be expected to realise.
At the date of this report, the Directors are not aware of any circumstances which would render the values attributed to the current assets in the financial statements of the Group and of the Company misleading. 2002 BERHAD • ANNUAL REPORT EON CAPITAL
VALUATION METHODS At the date of this report, the Directors are not aware of any circumstances which have arisen which render adherence to the existing methods of valuation of assets or liabilities in the Group’s and the Company’s financial statements misleading or inappropriate.
CONTINGENT AND OTHER LIABILITIES At the date of this report, there does not exist:
(a) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liability of any other person; or
(b) any contingent liability in respect of the Group and of the Company that has arisen since the end of the financial year other than in the ordinary course of business.
No contingent or other liability of the Group and of the Company has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may affect the ability of the Group and of the Company to meet their obligations as and when they fall due.
CHANGE OF CIRCUMSTANCES At the date of this report, the Directors are not aware of any circumstances, not otherwise dealt with in this report or the financial statements of the Group and of the Company, that would render any amount stated in the financial statements misleading.
ITEMS OF AN UNUSUAL NATURE The results of the operations of the Group and of the Company for the financial year were not, in the opinion of the Directors, substantially affected by any item, transaction or event of a material and unusual nature.
There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors, to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report is made. 64 directors’ report { continued }
DIRECTORS The Directors who have held office during the period since the date of the last report are as follows:
Tan Sri Dato’ Seri Mohd Saleh bin Sulong (appointed on 23 December 2002) Datin Dr. Umikalsum binti Mohd Noh (appointed on 17 December 2002) Rin Kei Mei (appointed on 23 December 2002) Dato’ Maznah binti Abdul Jalil (appointed on 23 December 2002)
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Dr. Tiong Ik King (appointed on 17 December 2002) Wizayaratnam Somasundram (appointed on 17 December 2002) Azlin bin Khalid (resigned on 22 January 2003) Yu Ching Ching (resigned on 22 January 2003)
In accordance with Article 102 of the Company’s Articles of Association, all Directors retire from the Board at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election.
DIRECTORS’ INTEREST IN SHARES According to the register of Directors’ shareholdings, the Directors who held office at the end of the financial year and have interest in shares and share options of the Company and its related corporations during the financial year are as follows:
Number of ordinary shares of RM1.00 each Balance at 1.1.2002/ At appoint- Balance at ment date Acquired Disposed 31.12.2002
The Company
Direct interest
Datin Dr. Umikalsum binti Mohd Noh - 79,006 - 79,006 Rin Kei Mei - 39,550 - 39,550 Dato’ Maznah binti Abdul Jalil - 60,000 - 60,000 Dr. Tiong Ik King - 43 - 43 Azlin bin Khalid 1 4,999 - 5,000 Yu Ching Ching 1 4,999 - 5,000
Deemed interest
Tan Sri Dato’ Seri Mohd Saleh bin Sulong - 322,944,403 - 322,944,403 Rin Kei Mei - 2,073,817 - 2,073,817 Dr. Tiong Ik King - 104,780,427 - 104,780,427 65
Number of ordinary shares of RM1.00 each Balance at 1.1.2002/ At appoint- Balance at ment date Acquired Disposed 31.12.2002
Holding company - Edaran Otomobil Nasional Berhad EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Direct interest
Rin Kei Mei 1,728,000 801,000 ( 1,000,000 ) 1,529,000 Dato’ Maznah binti Abdul Jalil - 169,000 - 169,000
Deemed interest
Tan Sri Dato’ Seri Mohd Saleh bin Sulong 72,967,000 1,000 - 72,968,000 Rin Kei Mei 21,900,000 1,848,000 - 23,748,000
Number of options over ordinary shares of RM1.00 each At appoint- Balance at ment date Granted Exercised 31.12.2002
Holding company - Edaran Otomobil Nasional Berhad
Direct interest
Dato’ Maznah binti Abdul Jalil 201,000 3,000 ( 169,000 ) 35,000
By virtue of their interests in shares in the Company, Tan Sri Dato’ Seri Mohd Saleh bin Sulong, Rin Kei Mei and Dr. Tiong Ik King are also deemed to have a substantial interest in the shares of the subsidiaries of the Company to the extent the Company has an interest.
By virtue of their interests in shares in Edaran Otomobil Nasional Berhad (‘EON Berhad’), Tan Sri Dato’ Seri Mohd Saleh bin Sulong and Rin Kei Mei are also deemed to have a substantial interest in the shares of the subsidiaries of EON Berhad to the extent EON Berhad has an interest.
Other than the above, none of the other Directors in office at the end of the financial year held any interest in shares and share options of the Company and its related corporations during the financial year.
DIRECTORS’ BENEFITS Since the end of the previous financial year, no Director of the Company has received or become entitled to receive any benefit (other than Directors’ remuneration and benefits-in-kind as disclosed in Note 26 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest. 66 directors’ report { continued }
DIRECTORS’ BENEFITS (CONTINUED) Tan Sri Dato’ Seri Mohd Saleh bin Sulong and Rin Kei Mei may be deemed to derive a benefit by virtue of credit facilities granted by the banking subsidiary in the ordinary course of its business, to companies in which they are deemed to have an interest.
During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements with the object or objects of enabling the Directors of the Company to acquire benefits by means
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL of the acquisition of shares in, or debenture of, the Company or any other body corporate.
SIGNIFICANT EVENT SUBSEQUENT TO THE BALANCE SHEET DATE On 1 January 2003, the entire credit portfolio of its merchant bank subsidiary, Malaysian International Merchant Bankers Berhad, had been transferred to its commercial bank subsidiary, EON Bank Berhad in accordance with the Vesting Order obtained from the High Court.
ULTIMATE HOLDING COMPANY The Directors regard Edaran Otomobil Nasional Berhad, a listed company incorporated in Malaysia, as the Company’s holding company and ultimate holding company.
AUDITORS The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.
Signed in accordance with a resolution of the Board of Directors.
TAN SRI DATO’ SERI MOHD SALEH BIN SULONG Director
DR. UMIKALSUM BINTI MOHD NOH Director
Kuala Lumpur 26 February 2003 statement by directors 67 Pursuant To Section 169(15) Of The Companies Act, 1965
We, Tan Sri Dato’ Seri Mohd Saleh bin Sulong and Dr. Umikalsum binti Mohd Noh, being two of the Directors of EON Capital Berhad, state that, in the opinion of the Directors, the financial statements set out on pages 69 to 121 are drawn up so as to give a true and fair view of the state of affairs of the Group and the Company as at 31 December 2002 and of the results and cash flows of the Group and of the Company for the financial year ended on that date in accordance with the applicable approved accounting standards in Malaysia, Bank Negara Malaysia Guidelines and the provisions of the Companies Act, 1965.
Signed in accordance with a resolution of the Board of Directors. 2002 BERHAD • ANNUAL REPORT EON CAPITAL
TAN SRI DATO’ SERI MOHD SALEH BIN SULONG Director
DR. UMIKALSUM BINTI MOHD NOH Director
Kuala Lumpur 26 February 2003
statutory declaration Pursuant To Section 169(16) Of The Companies Act, 1965
I, Martin Chu Leong Meng, the officer primarily responsible for the financial management of EON Capital Berhad, do solemnly and sincerely declare that the financial statements set out on pages 69 to 121 are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.
MARTIN CHU LEONG MENG
Subscribed and solemnly declared by the abovenamed Martin Chu Leong Meng at Kuala Lumpur on 26 February 2003, before me.
P. SETHURAMAN (No. W217) Commissioner for Oaths 68 report of the auditors To The Members Of EON Capital Berhad (Company No. 454644K)
We have audited the financial statements set out on pages 69 to 121. These financial statements are the responsibility of the Company’s Directors. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with approved auditing standards in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Directors, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion:
(a) the financial statements have been prepared in accordance with the applicable approved accounting standards in Malaysia, Bank Negara Malaysia Guidelines and the provisions of the Companies Act, 1965 so as to give a true and fair view of:
(i) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and
(ii) the state of affairs of the Group and the Company as at 31 December 2002 and of the results and cash flows of the Group and Company for the financial year ended on that date;
and
(b) the accounting and other records and the registers required by the Act to be kept by the Company and by its subsidiary companies have been properly kept in accordance with the provisions of the Act.
We are satisfied that the financial statements of the subsidiary companies that have been consolidated with the Company’s financial statements are in the form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes.
Our audit reports on the financial statements of the subsidiary companies were not subject to any qualification and did not include any comment made under subsection (3) of Section 174 of the Act.
PRICEWATERHOUSECOOPERS (No. AF: 1146) Chartered Accountants
MOHAMMAD FAIZ BIN MOHAMMAD AZMI (No. 2025/03/04 (J)) Partner of the firm
Kuala Lumpur 26 February 2003 balance sheets 69 As At 31 December 2002
Group Company Note 2002 2002 2001 RM’000 RM’000 RM’000
ASSETS
Cash and short-term funds 3 2,221,890 37,500 - Deposits and placements with financial institutions 4 393,000 - -
Dealing securities 5 954,842 - - 2002 BERHAD • ANNUAL REPORT EON CAPITAL Investment securities 6 4,357,813 - - Loans, advances and financing 7 20,573,665 - - Other assets 8 1,047,260 - - Statutory deposits with Bank Negara Malaysia 9 865,213 - - Investment in subsidiary companies 10 - 2,011,000 - Property, plant and equipment 11 159,114 - -
TOTAL ASSETS 30,572,797 2,048,500 -
LIABILITIES AND SHAREHOLDERS’ FUNDS
Deposits from customers 12 18,523,416 - - Deposits and placements of banks and other financial institutions 13 7,262,140 - - Obligations on securities sold under repurchase agreements 1,168,396 - - Bills and acceptances payable 155,565 - - Amounts due to Cagamas Berhad 14 841,980 - - Provision for taxation and zakat 15 92,867 40 - Long term borrowings 16 288,481 288,481 - Other liabilities 17 390,400 1,682 11
TOTAL LIABILITIES 28,723,245 290,203 11
SHARE CAPITAL 18 693,209 693,209 -* RESERVES 19 1,156,343 1,065,088 ( 11 )
SHAREHOLDERS’ FUNDS 1,849,552 1,758,297 ( 11 )
TOTAL LIABILITIES AND SHAREHOLDERS’ FUNDS 30,572,797 2,048,500 -
COMMITMENTS AND CONTINGENCIES 31 9,274,872 - -
* denotes RM2 70 income statements For The Financial Year Ended 31 December 2002
Group Company Note 2002 2002 2001 RM’000 RM’000 RM’000
Interest income 20 140,983 163 - Interest expense 21 ( 69,347 ) ( 1,081 ) -
Net interest income/(expense) 71,636 ( 918 ) -
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Income from Islamic Banking 8,200 - -
79,836 ( 918 ) - Loan and financing loss and provision 22 ( 2,900 ) - - Transfer to profit equalisation reserves ( 2,364 ) - -
74,572 ( 918 ) - Fee and commission income 8,664 - - Net loss from investment securities 23 ( 6,324 ) - - Net gain from dealing securities 490 - - Dividend income 109 - - Other income 24 7,105 - -
Net income/(loss) 84,616 ( 918 ) - Overhead expenses 25 ( 47,348 ) ( 383 ) ( 11 )
Profit/(loss) before taxation and zakat 37,268 ( 1,301 ) ( 11 ) Taxation 28 ( 13,192 ) ( 40 ) - Zakat ( 328 ) - -
Net profit/(loss) for the financial year 23,748 ( 1,341 ) ( 11 )
Earnings per share (sen) Basic 30 41.1 Diluted 30 41.1
Note: The financial results of the Group reflects inclusion of results of EON Bank Berhad group from the date of acquisition, i.e. 2 December 2002 to 31 December 2002. statements of changes in equity 71 For The Financial Year Ended 31 December 2002
Issued and fully paid ordinary shares of Distri- RM1 each Non-distributable butable Reserve Share Share Statutory arising on Retained capital premium reserve consolidation profit Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL The Group
Balance as at 1 January 2002 -* - - - ( 11 ) ( 11 ) Issue of shares: - exercise of rights 10 2 - - - 12 - pursuant to KCHB Scheme of arrangement 94,788 121,896 - - - 216,684 - pursuant to EBB Scheme of arrangement 598,411 945,489 - - - 1,543,900 Listing expenses written off - ( 947 ) - - - ( 947 ) Reserve arising from acquisition of subsidiary companies - - - 66,166 - 66,166 Net profit for the financial year ----23,748 23,748 Transfer to statutory reserve - - 7,075 - ( 7,075 ) -
Balance as at 31 December 2002 693,209 1,066,440 7,075 66,166 16,662 1,849,552
* denotes RM2. 72 statements of changes in equity { continued }
Issued and fully paid ordinary shares of Non-distri- RM1 each butable Share Share Accumu- capital premium lated losses Total RM’000 RM’000 RM’000 RM’000
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL The Company
Balance as at 1 January 2002 -* - ( 11 ) ( 11 ) Issue of shares: - exercise of rights 10 2 - 12 - pursuant to KCHB Scheme of arrangement 94,788 121,896 - 216,684 - pursuant to EBB Scheme of arrangement 598,411 945,489 - 1,543,900 Listing expenses written off - ( 947 ) - ( 947 ) Net loss for the financial year - - ( 1,341 ) ( 1,341 )
Balance as at 31 December 2002 693,209 1,066,440 ( 1,352 ) 1,758,297
Balance as at 1 January 2001 -* - - -* Net loss for the financial year - - ( 11 ) ( 11 )
Balance as at 31 December 2001 -* - ( 11 ) ( 11 )
* denotes RM2. cash flow statements 73 For The Financial Year Ended 31 December 2002
Group Company 2002 2002 2001 RM’000 RM’000 RM’000
CASH FLOW FROM OPERATING ACTIVITIES
Net profit/(loss) for the financial year 23,748 ( 1,341 ) ( 11 )
Adjustments for: 2002 BERHAD • ANNUAL REPORT EON CAPITAL Depreciation of property, plant and equipment 2,483 - - Net gain on disposal of property, plant and equipment ( 721 ) - - Property, plant and equipment written off 1,572 - - Net gain from sale of investment securities ( 11,549 ) - - Loan and financing loss and provision 3,337 - - Net interest suspended 9,927 - - Provision for amounts recoverable from Danaharta 258 - - Provision for diminution in value of investment securities 17,873 - - Accretion of discount less amortisation of premium ( 2,940 ) - - Provision for retirement benefits 96 - - Write-back of provision of commitments and contingencies ( 95 ) - - Interest income from investment securities ( 16,182 ) - - Dividend income ( 109 ) - - Interest income on deposits and placements - ( 163 ) - Interest expense on long term borrowings 1,081 1,081 - Profit equalisation reserves 2,364 - - Pre-operating and preliminary expenses written off --8 Taxation and zakat 13,520 40 -
44,663 ( 383 ) ( 3 )
(Increase)/decrease in operating assets
Deposits and placements with financial institutions ( 52,000 ) - - Dealing securities ( 16,112 ) - - Loans, advances and financing ( 170,686 ) - - Statutory deposits with Bank Negara Malaysia 30,864 - - Other assets ( 152,716 ) - -
( 360,650 ) - - 74 cash flow statements { continued }
Group Company Note 2002 2002 2001 RM’000 RM’000 RM’000
Increase/(decrease) in operating liabilities
Deposits from customers 638,836 - - Deposits and placements of banks
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL and other financial institutions 44,075 - - Obligations on securities sold under repurchase agreements 314,121 - - Bills and acceptances payable ( 72,257 ) - - Amounts due to Cagamas Berhad ( 13,445 ) - - Other liabilities ( 22,226 ) 697 3
889,104 697 3
Cash generated from operations 573,117 314 - Income tax paid ( 8,529 ) - -
Net cash generated from operating activities 564,588 314 -
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of investment securities, net of sale proceeds ( 370,677 ) - - Purchase of property, plant and equipment ( 7,437 ) - - Proceeds from disposal of property, plant and equipment 2,218 - - Interest received from deposit and placements - 163 - Interest received from investment securities 18,278 - - Net dividends received 109 - - Acquisition of subsidiary companies 35 1,510,689 ( 467,099 ) -
Net cash generated from/(used in) investing activities 1,153,180 ( 466,936 ) -
CASH FLOW FROM FINANCING ACTIVITIES
Net proceeds from issue of share capital 216,693 216,693 - Net proceeds from issue of long term borrowings 288,376 288,376 - Listing expenses ( 947 ) ( 947 ) -
Net cash generated from financing activities 504,122 504,122 -
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,221,890 37,500 -
CASH AND CASH EQUIVALENTS AT 1 JANUARY ---
CASH AND CASH EQUIVALENTS AT 31 DECEMBER 3 2,221,890 37,500 - summary of significant accounting policies 75 31 December 2002
The significant accounting policies of the Group and the Company are consistent with the policies adopted in previous financial year other than those adopted in compliance with the relevant Malaysian Accounting Standards Board’s (‘MASB’) approved accounting standards which became operative during the financial year ended 31 December 2002.
A BASIS OF PREPARATION The financial statements of the Group and the Company have been prepared under the historical cost
convention unless otherwise indicated in this summary of significant accounting policies and comply with 2002 BERHAD • ANNUAL REPORT EON CAPITAL the applicable approved accounting standards in Malaysia, Bank Negara Malaysia Guidelines and the provisions of the Companies Act, 1965.
In the financial year 2002, the Group and the Company adopted the following applicable MASB’s accounting standards:
MASB 19 Events After the Balance Sheet Date MASB 20 Provisions, Contingent Liabilities and Contingent Assets MASB 21 Business Combinations MASB 22 Segment Reporting MASB 23 Impairment of Assets MASB 24 Financial Instruments: Disclosure and Presentation
There are no significant changes in accounting policies, which had affected the operating profit of the Group and the Company arising from the adoption of these standards.
The financial statements incorporate those activities relating to Islamic Banking which have been undertaken by the banking and finance subsidiary companies. Islamic Banking refers generally to the acceptance of deposits and granting of financing under the Syariah principles.
B BASIS OF CONSOLIDATION The consolidated financial statements include the financial statements of the Company and all its subsidiary companies made up to the end of the financial year.
Subsidiary companies are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases. Subsidiary companies are consolidated using the acquisition method of accounting.
Under the acquisition method of accounting, the results of subsidiary companies acquired or disposed of are included from the date of acquisition up to the date of disposal. At the date of acquisition, the fair values of the subsidiary companies’ net assets are determined and these values are reflected in the consolidated financial statements. The excess of fair values of the subsidiary companies’ net assets over the acquisition cost is reflected as reserve arising on consolidation.
All material inter-company transactions, balances and unrealised surpluses and deficits on transactions between group companies have been eliminated on consolidation and the consolidated financial statements reflect external transactions only. 76 summary of significant accounting policies { continued }
C RECOGNITION OF INTEREST INCOME Interest income is recognised on an accrual basis using the effective yield method. Interest income includes coupons earned on fixed income investment and trading securities and accrued discount and premium on discounted instruments. Interest income on housing and term loans is recognised by reference to monthly rest periods. Interest income on hire purchase, lease receivables and block discounting is recognised using the “sum-of-digits” method, so as to produce a constant periodic rate of interest.
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Where a loan account becomes non-performing, interest is suspended until it is realised on a cash basis. Customers’ accounts are classified as non-performing when repayments are in arrears for 6 months or more from first day of default for loans and overdrafts, and after 3 months from maturity date for trade bills, bankers’ acceptances and trust receipts. The Group’s policy on suspension of interest is in conformity with Bank Negara Malaysia’s “Guidelines on the classification of Non-performing Loans and Provision for Substandard, Bad and Doubtful Debts”.
D RECOGNITION OF FEES AND OTHER INCOME Loan arrangement fees and commissions are recognised as income when all conditions precedent are fulfilled.
Commitment fees and guarantee fees which are material are recognised as income based on time apportionment.
Fees from advisory and corporate finance activities are recognised as income on completion of each stage of the assignment.
Income from Islamic Banking is recognised on an accrual basis in accordance with the principles of Syariah and the BNM/GP8.
Dividends from subsidiary companies are recognised when the shareholders’ right to receive payment is established, while dividends from dealing securities and investment securities are recognised when received.
E PROVISION FOR BAD AND DOUBTFUL DEBTS AND FINANCING Specific provisions are made for doubtful debts which have been individually reviewed and specifically identified as bad or doubtful.
A general provision based on a percentage of the loan portfolio is also made to cover possible losses that are judged to be present in the lending portfolio at balance sheet date, but which have not been specifically identified as such.
An uncollectible loan, advances and financing or portion of a loan, advances and financing classified as bad is written-off after taking into consideration the realisable value of collateral, if any, when in the judgement of the management, there is no prospect of recovery.
The Group’s provision for non-performing loans is in conformity with the minimum requirements of Bank Negara Malaysia’s “Guidelines on the classification of Non-performing Loans and Provision for Substandard, Bad and Doubtful Debts”. 77
F DEALING SECURITIES Dealing securities are marketable securities that are acquired and held with the intention of resale in the short term, and are stated at the lower of cost and market value. Increases or decreases in carrying amount of dealing securities are charged or credited to the income statement.
Transfer, if any, between dealing and investment securities are made at the lower of cost and market value.
On disposal, the difference between the net disposal proceeds and its carrying amount is charged or credited 2002 BERHAD • ANNUAL REPORT EON CAPITAL to the income statement.
G INVESTMENT SECURITIES Investment securities are securities that are acquired and held for yield or capital growth or to meet minimum liquid assets requirement pursuant to Section 38 of the Banking and Financial Institutions Act, 1989 and are usually held to maturity.
Malaysian Government securities, Bank Negara Malaysia bills, Cagamas bonds, Malaysian Government investment issues, other Government securities, and Bank Guaranteed Private Debt Securities held for investment are stated at cost adjusted for amortisation of premium or accretion of discount to maturity date. Other Private Debt Securities are valued at lower of cost and market value. Other investment securities are stated at cost and provision is made in the event of any permanent diminution in value.
Amortisation of premium or accretion of discount is recognised using effective yield method. Interest earned while holding the investment securities and dividends received are recognised as interest income and dividend income respectively.
Permanent diminution in the value of investment securities is recognised as an expense in the period in which the diminution is identified.
Transfers, if any, between investment and dealing securities are made at the lower of carrying value and market value.
On disposal, the difference between the net disposal proceeds and its carrying amount is charged or credited to the income statement.
H LOANS, ADVANCES AND FINANCING AND OTHER RECEIVABLES Loans, advances and financing and other receivables include overdrafts, term loans, hire purchase financing, acceptances of credit and staff loans. They are carried at amortised cost represented by the gross value of the outstanding balance net of provision for bad and doubtful debts, unearned interest/income and interest- in-suspense/income-in-suspense. 78 summary of significant accounting policies { continued }
I INVESTMENT IN SUBSIDIARY COMPANIES A subsidiary company is a company in which the Group has power to exercise control over the financial and operating policies so as to obtain benefits from its activities.
Investments in subsidiary companies are stated at cost and written down when, in the opinion of the Directors, there is a permanent diminution in the value of such investments.
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Permanent diminution in the value of investments in subsidiary companies is recognised as an expense in the period in which the diminution is identified.
J PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses.
Freehold land is not depreciated as it has an infinite life. Leasehold land having an unexpired term in excess of fifty years is not amortised. Other property, plant and equipment are depreciated over their estimated useful lives on the straight line basis at the following annual depreciation rates:
Leasehold land Over the lease period Buildings on freehold and leasehold land 2% Office renovation 10% - 33 1/3% Furniture, fittings and equipment 10% - 20% Computer equipment and software 20% Motor vehicles 20%
Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.
K REPURCHASE AGREEMENTS Securities purchased under resale agreements are securities which the Group had purchased with a commitment to resell at future dates. The commitment to resell the securities are reflected as assets on the balance sheet. Securities purchased are not recognised in the financial statements.
Conversely, obligation on securities sold under repurchase agreements are securities which the Group had sold from its portfolio, with a commitment to repurchase at future dates. Such financing transactions and the obligation to repurchase the securities are reflected as liabilities on the balance sheet. Securities sold are retained in the financial statements.
The difference between sale and repurchase price as well as purchase and resell price is treated as interest and accrued over the life of the repurchase agreement using effective yield method.
L BILLS AND ACCEPTANCES PAYABLE Bills and acceptances payable represent the Group’s own bills and acceptances rediscounted and outstanding in the market. 79
M CURRENCY TRANSLATION Transactions in foreign currencies are converted into Ringgit Malaysia at the rates of exchange ruling at the dates of the transactions. Monetary assets and liabilities in foreign currencies at the balance sheet date are converted into Ringgit Malaysia at rates of exchange which approximate to those ruling at the balance sheet date. Gains or losses on foreign exchange transactions are recognised as income or expense in the period in which they arise.
The principal closing rates used by the Group in translation of foreign currency amounts are as follows: 2002 BERHAD • ANNUAL REPORT EON CAPITAL
Foreign currency 31.12.2002 RM
1 US Dollar 3.800 1 Euro 3.981 1 Pound Sterling 6.092 1 Japanese Yen 0.032 1 Singapore Dollar 2.189
N FORWARD FOREIGN EXCHANGE CONTRACTS Open forward exchange contracts are valued at forward rates as at balance sheet date, applicable to their respective dates of maturity and unrealised gains or losses are recognised in the income statement for the period in which they arise.
O DEFERRED TAXATION Provision is made using the liability method for deferred taxation in respect of all material timing differences except where the tax effects of such timing differences are expected to be deferred indefinitely. However, where the net timing differences and tax losses give rise to deferred tax benefits, these net benefits are not recognised, unless there is a reasonable expectation of realisation.
P PROVISIONS Provisions, other than provision for bad and doubtful debts, are recognised when the Group and the Company have a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.
Q DEALERS’ COMMISSION AND HANDLING FEE Dealers’ commission are amortised over the period of the hire purchase loans using the “sum-of-digits” method. Handling fee is recognised as an expense when incurred.
R OPERATING LEASES Leases of assets under which all the risks and benefits of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight line basis over the period of the lease. 80 summary of significant accounting policies { continued }
S AMOUNTS RECOVERABLE FROM DANAHARTA The total consideration from loans sold to Pengurusan Danaharta Nasional Berhad (Danaharta) is received in two portions; upon the sale of the loans (initial consideration) and upon the recovery of the loans (final consideration). The final consideration amount represents the Group’s pre-determined share of the surplus over the initial consideration upon recovery of the loans.
The difference between the carrying value of the loans and the initial consideration is recognised as ‘Amounts
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL recoverable from Danaharta’ within the ‘Other assets’ component of the balance sheet. Provision against these amounts are made in accordance with Bank Negara Malaysia’s “Guidelines on the Sale of Non- performing Loans to Danaharta” issued on 30 April 2001 and reflect the Directors’ assessment of the realisable value of the final consideration as at the balance sheet date.
T RETIREMENT BENEFITS Malaysian International Merchant Bankers Berhad, a subsidiary of the Company, operates an unfunded defined benefit scheme.
The cost of providing retirement benefits is charged to the income statements so as to spread the regular cost over the service lives of the employees in accordance with the advice of qualified actuary who carry out a full valuation of the scheme every three years.
The retirement benefit cost is assessed using the projected accrued benefit method and the most recent valuation was at 31 December 2000. The retirement benefits obligations is measured at the present value of estimated future cash outflows using interest rates of government securities.
U LONG TERM BORROWINGS Borrowings are recognised initially at cost, being their issue proceeds received, net of transaction cost incurred. In subsequent periods, borrowings are stated at amortised cost and any difference between net proceeds and the redemption value is recognised in the income statements over the period of the borrowing using the effective yield method.
V DIVIDENDS Dividends on ordinary shares are recognised as liabilities in the period in which the dividends are declared.
W CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash in hand, bank balances and deposits and placements maturing within one month which are held for the purpose of meeting short term commitments and are readily convertible into cash without significant risk of changes in value.
X SEGMENTAL PRESENTATION A segment is a distinguishable component of the Group that is engaged in providing products or services, which is subject to risk and rewards that are different from those of other segments. Segment with a majority of operating income earned from providing products or services to external clients and whose operating income, results or total assets are 10 percent or more of all segments are reported separately. notes to the financial statements 81 31 December 2002
1 GENERAL INFORMATION During the financial year, the Company commenced its operation as an investment holding company upon the acquisition of EON Bank Berhad as disclosed in Note 35 to the financial statements. The Group is involved in commercial banking, merchant banking, finance company business and nominee and custodian services.
The principal activities of the subsidiaries are as stated in Note 10 to the financial statements. EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL The number of employees in the Group and in the Company at the end of the financial year amounted to 4,791 employees and Nil (2001: Nil) respectively.
The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Board of the Kuala Lumpur Stock Exchange.
The Directors regard Edaran Otomobil Nasional Berhad, a listed company incorporated in Malaysia, as the Company’s holding company and ultimate holding company.
The address of the registered office of the Company is:
12th Floor, Wisma Cyclecarri 288, Jalan Raja Laut 50350 Kuala Lumpur Malaysia
2 USE OF FINANCIAL INSTRUMENTS
A Financial risk management objectives and policies
Market risk Market risk is the potential loss which can arise for positions held by the Group due to adverse changes in the level of market prices or price-influencing parameters in the financial markets. The adverse changes can occur in interest rate, foreign exchange and equity markets. These risks are monitored by way of net open position limits, portfolio limits, diversification limits, holding limits, concentration limits by sectors and stop loss limits.
Credit risk Credit risk is the potential loss arising from customers or counterparties failing to meet their financial contractual obligations. Management of credit risk is principally through lending directions and policies, which are instituted based on prevailing business and economic conditions. Credit processes are also structured to ensure adherence of credit principles and to establish impartiality in loan origination, approval, documentation, disbursement and settlement. Industry sectors concentration, exposure to various product segments and internal single customer limit are regularly monitored to minimise the risk of over-concentration. The overall credit risk management is subjected to an ongoing process for reviewing and enhancement. 82 notes to the financial statements { continued }
2 USE OF FINANCIAL INSTRUMENTS (continued)
A Financial risk management objectives and policies (continued)
Credit risk (continued) The internal credit risk rating system is being developed to better measure the credit worthiness of each customer. This rating system will also link credit risk grading to default probabilities and enable risk-
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL based assessment of loan portfolio.
Credit reviews on loan applications before being approved by higher approving authorities are conducted independently from business units involved in the loan origination. Approval of loans with unacceptable credit risks or large exposures exceeding the internal single customer limits will be reported to the Group Risk Management Committee and the Board of Directors.
Liquidity risk Liquidity risk is the risk that an enterprise will encounter difficulty in raising funds to meet its current and future payment obligations associated with financial obligations when they fall due. Principally, the Group uses the New Liquidity Framework approved by Bank Negara Malaysia to manage its liquidity.
The Group focuses on avoiding dependence on volatile sources of funding, diversification of funding maturity structure and sources of funds as well as maintenance of sufficient liquid assets. Contingency funding plans have been developed to ensure alternative funding strategies are in place in order to minimise the liquidity risk during liquidity crisis situation. Various “Management Action Triggers” are established to prompt the Management for taking any necessary actions to meet the liquidity crisis.
Operational risk Operational risk, which is inherent in all business activities, is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.
Operational Risk Management (‘ORM’) takes place on a day-to-day basis at each business unit level. These units are responsible for establishing and maintaining control and procedures that are appropriate for their operating environment. Integral elements such as sound banking processes, internal control, and independent audit groups are used to manage these risks. Additional support comes from group- wide functions such as internal audit, banking operations (including system and methods), compliance and financial control.
The activities of ORM include risk identification, assessment, monitoring and reporting. Within the Group, they are manifested in the following manners:
* Manuals and policies that incorporate internal control processes * Human resources development and training programmes * System controls and procedures governing IT usage in all banking products * Establishment of specific policies and standards across all product lines * Group’s Business Continuity Plan that looks into its business resumption in an organised and timely manner in time of disaster * Group’s New Product Process to ensure that before new products and activities are being introduced, they are subject to proper risk assessments and possess adequate procedures and controls 83
Interest rate risk The Group may be exposed to a loss in earnings due to the interest rates structure of the balance sheet arising from interest rates and yield curves changes. The sensitivity to interest rates arises from the mismatches in the repricing dates, cash flows and other characteristics of the assets and their corresponding liability funding. Interest rate risk is monitored through interest rate sensitivity gap limits.
B Interest rate risk 2002 BERHAD • ANNUAL REPORT EON CAPITAL
The table below summarises the Group’s and the Company’s exposure to interest rate risks. Included in the table are the Group’s and the Company’s assets and liabilities at carrying amounts, categorised by the earlier of contractual repricing or maturity dates. The off-balance sheet gap represents the net notional amounts of all interest rate sensitive derivative financial instruments. As interest rates and yield curves change over time the Group and the Company may be exposed to a loss in earnings due to the effects of interest rates on the structure of the balance sheet. Sensitivity to interest rates arises from mismatches in the repricing dates, cash flows and other characteristics of the assets and their corresponding liability funding.
Year ended 2002 Up to 1 - 3 3 - 12 1 - 5 Over Non-interest Islamic 1 month months months years 5 years bearing Banking Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
Assets Cash and short-term funds and deposits and placements with financial institutions 2,125,054 336,000 57,000 - - 91,005 5,831 2,614,890 Dealing securities 8,007 6,835 117,447 214,816 250,131 4,432 353,174 954,842 Investment securities 183,476 331,600 278,876 1,668,545 1,306,451 41,190 547,675 4,357,813 Loans, advances and financing 11,912,262 202,036 201,383 3,833,426 3,938,242 ( 1,402,862 )^ 1,889,178 20,573,665 Statutory deposits with Bank Negara Malaysia - - - - - 822,082 43,131 865,213 Other assets (1) - - - - - 1,178,293 28,081 1,206,374
Total assets 14,228,799 876,471 654,706 5,716,787 5,494,824 734,140 2,867,070 30,572,797
^ The negative balance represents specific provisions, interest-in-suspense and general provisions for loans and advances made in accordance with the Group’s accounting policy on provision for bad and doubtful debts, net of interest-free staff motor vehicles loans.
Note: (1) Other assets include property, plant and equipment. 84 notes to the financial statements { continued }
2 USE OF FINANCIAL INSTRUMENTS (CONTINUED)
B Interest rate risk (continued)
Year ended 2002 Up to 1 - 3 3 - 12 1 - 5 Over Non-interest Islamic 1 month months months years 5 years bearing Banking Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL
Liabilities Deposits from customers 6,888,905 2,305,262 5,222,979 1,044,817 - 1,384,777 1,676,676 18,523,416 Deposits and placements of banks and other financial institutions 1,037,994 836,491 2,547,387 173,961 1,400,000 393,458 872,849 7,262,140 Obligations on securities sold under repurchase agreements 1,168,396 ------1,168,396 Bills and acceptances payable - - - - - 154,322 1,243 155,565 Amounts due to Cagamas Berhad 2,712 5,458 81,203 691,047 - 61,560 - 841,980 Long term borrowings - - - 150,000 150,000 ( 11,519 )^ - 288,481 Other liabilities (2) - - - - - 443,090 40,177 483,267
Total liabilities 9,098,007 3,147,211 7,851,569 2,059,825 1,550,000 2,425,688 2,590,945 28,723,245
On-balance sheet - interest rate gap 5,130,792 ( 2,270,740 ) ( 7,196,863 ) 3,656,962 3,944,824 Off-balance sheet - interest rate gap -----
Net interest rate gap 5,130,792 ( 2,270,740 ) ( 7,196,863 ) 3,656,962 3,944,824
^ The negative balance represents unamortised discount for long term secured fixed rate bonds calculated in accordance with the Group’s accounting policy on long term borrowings.
Note : (2) Other liabilities include provision for taxation. 85
2 USE OF FINANCIAL INSTRUMENTS (CONTINUED)
B Interest rate risk (continued)
Year ended 2002 Up to 1 - 3 3 - 12 1 - 5 Over Non-interest 1 month months months years 5 years bearing Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Company 2002 BERHAD • ANNUAL REPORT EON CAPITAL
Assets Cash and short- term funds 37,450 ----5037,500 Investment in subsidiary companies -----2,011,000 2,011,000
Total assets 37,450 ----2,011,050 2,048,500
Liabilities Long term borrowings - - - 150,000 150,000 ( 11,519)^ 288,481 Other liabilities (2) -----1,722 1,722
Total liabilities - - - 150,000 150,000 ( 9,797 ) 290,203
Net interest rate gap 37,450 - - ( 150,000 ) ( 150,000 )
^ The negative balance represents unamortised discount for long term secured fixed rate bonds calculated in accordance with the Company’s accounting policy. Note: (2) Other liabilities include provision for taxation.
Pursuant to the transitional provisions of MASB 24, the information on the interest rate risk of financial assets, financial liabilities and off-balance sheet items as at 31 December 2001 is not presented. 86 notes to the financial statements { continued }
2 USE OF FINANCIAL INSTRUMENTS (CONTINUED)
B Interest rate risk (continued)
The table below summarises the effective average interest rate for each class of financial assets and financial liabilities: Group
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL 31.12.2002 RM %
Financial assets Cash and short-term funds and deposits and placements with financial institutions 3.28 Dealing securities 3.37 Investment securities 3.58 Loans, advances and financing 7.68
Financial liabilities Deposits from customers 2.84 Deposits and placements of banks and other financial institutions 1.30 Obligations on securities sold under repurchase agreements 2.75 Amounts due to Cagamas Berhad 4.35 Long term borrowings 7.23
Company 31.12.2002 RM %
Financial asset Cash and short-term funds 3.00
Financial liability Long term borrowings 7.23
Pursuant to the transitional provisions of MASB 24, the information on the effective average interest rate for each class of financial assets and financial liabilities as at 31 December 2001 is not presented. 87
2 USE OF FINANCIAL INSTRUMENTS (CONTINUED)
C Credit risk
The table below sets out the credit risk concentrations of the Group:
Year ended 2002 Short-term funds and Loans, Total Commit-
placements Statutory advances on-balance ments and 2002 BERHAD • ANNUAL REPORT EON CAPITAL with financial deposit with Dealing Investment and Other sheet contin- institutions BNM securities securities financing assets exposures gencies(1) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Agriculture - - - 50,000 169,475 1,172 220,647 67,265 Mining and quarrying - - 15,986 51,786 50,508 426 118,706 1,808 Manufacturing - - 51,204 16,846 2,156,464 4,805 2,229,319 295,692 Infrastructure and utilities - - 281,508 267,113 52,490 5,491 606,602 35,961 Construction - - 25,994 35,239 1,433,594 1,436 1,496,263 587,521 Real estate - - 4,946 124,825 631,494 303 761,568 60,752 General commerce - - 60,667 136,952 1,393,462 2,451 1,593,532 181,496 Transport, storage and communi- cation - - 35,150 82,050 594,405 2,284 713,889 158,475 Finance, insurance and business services 1,737,320 - 124,940 696,274 300,953 73,258 2,932,745 199,478 Government and government agencies 775,238 865,213 350,015 2,846,377 - 20,606 4,857,449 - Purchase of landed property - - - - 4,911,937 - 4,911,937 - Purchase of securities - - - - 788,955 - 788,955 28 Purchase of transport vehicles - - - - 7,048,560 11 7,048,571 118,255 Others - - - - 1,418,428 2,862 1,421,290 110,202
2,512,558 865,213 950,410 4,307,462 20,950,725^ 115,105 29,701,473 1,816,933
^ Excludes general provision for doubtful debts amounting to RM377,060,000.
Note: (1) Risk concentrations for commitments and contingencies are based on the credit equivalents balances in Note 31 to the financial statements.
Pursuant to the transitional provisions of MASB 24, the information on the credit risk concentrations as at 31 December 2001 is not presented. 88 notes to the financial statements { continued }
3 CASH AND SHORT-TERM FUNDS Group Company 2002 2002 2001 RM’000 RM’000 RM’000
Cash and balances with banks and other financial institutions 100,510 50 - Money at call and deposit placements maturing within one month 2,121,380 37,450 - EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL 2,221,890 37,500 -
4 DEPOSITS AND PLACEMENTS WITH FINANCIAL INSTITUTIONS Group 2002 RM’000
Licensed banks 140,000 Other financial institutions 253,000
393,000
5 DEALING SECURITIES Group 2002 RM’000
Money market instruments: Malaysian Government securities 183,604 Malaysian Government investment issues 45,663 Cagamas bonds 35,396 Negotiable instruments of deposit 23,495 Danamodal bonds 87,740 Danaharta bonds 23,940 Khazanah bonds 9,068 Bankers’ acceptances and Islamic accepted bills 14,842
423,748 Quoted securities: Shares quoted in Malaysia 4,432
Unquoted securities: Islamic commercial papers (Murabahah Notes Issuance Facility) 58,707 Private and Islamic debt securities 467,955
954,842
Market value of money market instruments and quoted securities: Malaysian Government securities 183,718 Malaysian Government investment issues 45,825 Cagamas bonds 35,432 Danamodal bonds 87,903 Danaharta bonds 24,050 Khazanah bonds 9,068 Shares quoted in Malaysia 5,827 89
6 INVESTMENT SECURITIES Group 2002 RM’000
Money market instruments: Bank Negara Malaysia bills 94,479 Malaysian Government Treasury bills 383,731
Malaysian Government securities 1,508,056 2002 BERHAD • ANNUAL REPORT EON CAPITAL Malaysian Government investment issues 269,075 Cagamas bonds 470,845 Cagamas Mudharabah bonds 40,380 Cagamas notes 134,750 Negotiable instruments of deposit 50,000 Danamodal bonds 58,501 Khazanah bonds 96,807 Green Bankers’ acceptances 1,088
3,107,712 Quoted securities: Outside Malaysia Shares 1,249
In Malaysia Shares 119,835 Private debt securities 21,010
3,249,806 Unquoted securities: Shares 19,218 Commercial papers 15,000 Islamic commercial papers (Murabahah Notes Issuance Facility) 109,476 Private and Islamic debt securities 1,090,306
4,483,806
Amortisation of premium less accretion of discount ( 8,965 ) Provision for diminution in value of investment securities ( 117,028 )
4,357,813 90 notes to the financial statements { continued }
6 INVESTMENT SECURITIES (CONTINUED)
(i) Market value of money market instruments and quoted securities: Group 2002 RM’000
Bank Negara Malaysia bills 94,506
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Malaysian Government Treasury bills 385,469 Malaysian Government securities 1,500,699 Malaysian Government investment issues 271,610 Cagamas bonds 470,428 Cagamas Mudharabah bonds 40,380 Cagamas notes 134,788 Danamodal bonds 58,602 Khazanah bonds 99,299 Shares quoted outside Malaysia 893 Shares quoted in Malaysia 24,005 Private debt securities quoted in Malaysia 5,042
(ii) The maturity structure of money market instruments held for investment is as follows:
Maturing within one year 866,531 One year to three years 1,416,137 Three years to five years 824,812 Over five years 232
3,107,712
(iii) The aggregate carrying amounts of investment securities that have been mortgaged or pledged in the normal course of business to secure the liabilities of the Group arising from obligations on securities sold under repurchase agreements amounted to RM1,173,497,000. 91
7 LOANS, ADVANCES AND FINANCING Group 2002 RM’000
Overdrafts 2,676,976 Term loans - fixed rate 2,485,435
- floating rate 7,515,234 2002 BERHAD • ANNUAL REPORT EON CAPITAL Hire purchase receivables 9,413,100 Lease receivables 8,044 Bills receivables 10,332 Trust receipts 82,539 Claims on customers under acceptance credits 1,176,964 Staff loans 193,447 Other loans 861,241
24,423,312
Unearned interest and income ( 2,362,017 )
Gross loans, advances and financing 22,061,295
Provision for bad and doubtful debts and financing - Specific ( 744,687 ) - General ( 377,060 )
Interest-in-suspense/income-in-suspense ( 365,883 )
Net loans, advances and financing 20,573,665
(i) The maturity structure of loans, advances and financing is as follows:
Maturing within one year 6,692,893 One year to three years 2,219,180 Three years to five years 3,785,126 Over five years 9,364,096
22,061,295 92 notes to the financial statements { continued }
7 LOANS, ADVANCES AND FINANCING (CONTINUED) Group 2002 RM’000
(ii) Loans, advances and financing analysed by their economic purposes are as follows:
Agriculture 172,085
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Mining and quarrying 51,154 Manufacturing 2,358,611 Electricity, gas and water 52,570 Construction 1,666,376 (of which : Infrastructure) 357,956 Real estate 710,025 Purchase of landed property 5,058,135 (of which : i. Residential 3,421,053 ii. Non-residential) 1,637,082 General commerce 1,407,637 Transport, storage and communication 619,304 Finance, insurance and business services 332,657 Purchase of securities 839,547 Purchase of transport vehicles 7,168,101 Consumption credit 1,068,069 Others 557,024
22,061,295
(iii) Movements in the non-performing loans, advances and financing (including interest and income receivable) are as follows:
Balance as at 1 January - Amount arising from acquisition of subsidiary companies 2,847,890 Non-performing during the financial year (gross) 93,883 Amount recovered/reclassified ( 61,596 ) Amount written off ( 233,035 ) Amount converted to investment securities ( 86,486 )
2,560,656 Non-performing loans from ex-OBB’s portfolio ( 989,333 )
Balance as at 31 December 1,571,323
Net non-performing loans, advances and financing 1,011,555
(As % of total loans net of specific provision and interest-in-suspense/income-in-suspense) 4.90%
The gross loans, advances and financing vested over from ex-OBB amounted to RM5.39 billion. 93
7 LOANS, ADVANCES AND FINANCING (CONTINUED)
(iv) Movements in the provision for bad and doubtful debts and financing and interest-in-suspense/income- in-suspense are as follows: Group 2002 RM’000
General provision 2002 BERHAD • ANNUAL REPORT EON CAPITAL
Balance as at 1 January - Amount arising from acquisition of subsidiary companies 377,373 Provisions written back during the financial year ( 313 )
Balance as at 31 December 377,060
(As % of total loans net of specific provision and interest-in-suspense/income-in-suspense) 1.80%
Specific provision
Balance as at 1 January - Amount arising from acquisition of subsidiary companies 777,372 Provisions made during the financial year 5,520 Provisions charged to deferred asset/other assets during the financial year 88,571 Amount written back in respect of recoveries/reclassification ( 3,054 ) Recoveries set-off against deferred asset ( 6,687 ) Amount written off ( 117,035 )
Balance as at 31 December 744,687 94 notes to the financial statements { continued }
7 LOANS, ADVANCES AND FINANCING (CONTINUED)
(iv) Movements in the provision for bad and doubtful debts and financing and interest-in-suspense/income- in-suspense are as follows: (continued) Group 2002 RM’000
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Interest-in-suspense/income-in-suspense
Balance as at 1 January - Amount arising from acquisition of subsidiary companies 473,423 Provisions made during the financial year 14,694 Amount written back in respect of recoveries/reclassification ( 6,026 ) Amount written off ( 116,208 )
Balance as at 31 December 365,883
8 OTHER ASSETS Group 2002 RM’000
Interest/income receivable 54,232 Other debtors, deposits and prepayments, net of provision for doubtful debts of RM5,340,000 284,465 Dealers’ commission 12,392 Amount due from originating non-banking institutions for mortgage loans sold on their behalf to Cagamas Berhad (note (i)) 61,560 Amounts recoverable from Danaharta (note (ii)) 388 Deferred asset account (note (iii)) 634,223
1,047,260 95
8 OTHER ASSETS (CONTINUED)
(i) Amount due from originating non-banking institutions for mortgage loans sold on their behalf to Cagamas Berhad
In the normal course of its banking operations, the merchant bank subsidiary enters into agreements with third parties to acquire loans for onward sale to Cagamas Berhad with recourse. Included in
‘Amounts due to Cagamas Berhad’ as disclosed in Note 14 is the outstanding balance of RM61,560,000 2002 BERHAD • ANNUAL REPORT EON CAPITAL for which the merchant bank subsidiary is liable in respect of loans sold to Cagamas Berhad. The liability is fully indemnified by the originator of the loans and accordingly the amount so indemnified is disclosed as ‘Amount due from originating non-banking institutions for mortgage loans sold on their behalf to Cagamas Berhad’.
(ii) Amounts recoverable from Danaharta Group 2002 RM’000
Balance as at 1 January - Amount arising from acquisition of subsidiary companies 646 Provision made during the period ( 258 )
Balance as at 31 December 388
(iii) Deferred asset account
The net asset deficiency, representing the excess of liabilities over the assets transferred arising from the acquisition of the assets and liabilities of OBB by EON Bank Berhad, is shown as deferred asset, and will be reduced progressively by an arrangement which has been agreed with Bank Negara Malaysia.
9 STATUTORY DEPOSITS WITH BANK NEGARA MALAYSIA The non-interest bearing statutory deposits relates to the banking and finance subsidiary companies and are maintained with Bank Negara Malaysia in compliance with Section 37(1)(c) of the Central Bank of Malaysia Act, 1958 (Revised-1994), the amounts of which are determined as set percentages of total eligible liabilities. 96 notes to the financial statements { continued }
10 INVESTMENT IN SUBSIDIARY COMPANIES Company 2002 RM’000
Unquoted shares, at cost 2,011,000
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL The subsidiary companies, all incorporated in Malaysia, are as follows:
Issued Percentage and paid-up of equity Name of subsidiary companies Principal activities ordinary capital held 2002 2002 RM %
Held by the Company
EON Bank Berhad Commercial bank 1,329,807,163 100
Held by EON Bank Berhad
Malaysian International Merchant bank 75,000,000 100 Merchant Bankers Berhad
EON Finance Berhad Finance company 275,000,000 100
EB Nominees (Tempatan) Sdn Bhd Nominees services 10,000 100
EB Nominees (Asing) Sdn Bhd Nominees services 10,000 100
EB Realty Sdn Bhd Property investment 100,000 100
OBB Realty Sdn Bhd Property investment 330,000 100
Oriental Nominee (Tempatan) Sdn Bhd Nominees services 10,000 100
OFB Berhad Dormant 105,626,000 100
Held by Malaysian International Merchant Bankers Berhad
MIMB Nominees (Tempatan) Nominees services 10,000 100 Sendirian Berhad
MIMB Nominees (Asing) Nominees services 10,000 100 Sendirian Berhad 97
10 INVESTMENT IN SUBSIDIARY COMPANIES (CONTINUED)
Issued Percentage and paid-up of equity Name of subsidiary companies Principal activities ordinary capital held 2002 2002 RM %
Held by EON Finance Berhad EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL CFB Asa Berhad (formerly known Dormant 35,549,000 100 as City Finance Berhad)
CFB Nominees (Tempatan) Sdn Bhd Dormant 2 100
PFB Asa Berhad (formerly known Dormant 32,600,000 100 as Perkasa Finance Berhad)
Perkasa Nominees (Tempatan) Sdn Bhd Dormant 10,000 100 98 notes to the financial statements { continued }
11 PROPERTY, PLANT AND EQUIPMENT
Leasehold land Buildings Furniture, Computer and building on fittings equipment Freehold less than 50 years freehold Office and and Motor land 50 years and more land renovation equipment software vehicles Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL 2002
Net book value Net book value as at 1 January ------Arising from acquisition of subsidiary companies 10,836 1,614 8,028 49,211 23,341 29,993 30,760 3,446 157,229 Additions - - - - 943 596 5,802 96 7,437 Disposals and write off - - - - ( 663 ) ( 893 ) ( 502 ) ( 1,011 ) ( 3,069 ) Depreciation charge for the financial year - ( 6 ) - ( 111 ) ( 534 ) ( 502 ) ( 1,203 ) ( 127 ) ( 2,483 )
Net book value as at 31 December 10,836 1,608 8,028 49,100 23,087 29,194 34,857 2,404 159,114
Cost 10,836 2,213 8,042 51,995 40,804 55,725 100,594 6,974 277,183 Accumulated depreciation - ( 605 ) ( 14 ) ( 2,895 ) ( 17,717 ) ( 26,531 ) ( 65,737 ) ( 4,570 ) ( 118,069 )
Net book value as at 31 December 10,836 1,608 8,028 49,100 23,087 29,194 34,857 2,404 159,114 99
12 DEPOSITS FROM CUSTOMERS Group 2002 RM’000
Demand deposits 2,383,727 Savings deposits 1,110,790 Fixed/Investment deposits 15,028,899 EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL 18,523,416
(i) The maturity structure of fixed/investment deposits is as follows:
Due within six months 10,379,755 Six months to one year 3,497,596 One year to three years 1,134,307 Three years to five years 17,241
15,028,899
(ii) The deposits are sourced from the following types of customers:
Business enterprises 5,698,186 Individuals 9,849,086 Others 2,976,144
18,523,416
13 DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS Group 2002 RM’000
Licensed banks 1,734,285 Licensed finance companies 287,983 Other financial institutions 5,239,872
7,262,140
Included in the above are negotiable instruments of deposit of the Group amounting to RM895,000,000. 100 notes to the financial statements { continued }
14 AMOUNTS DUE TO CAGAMAS BERHAD This relates to outstanding loan amount sold to Cagamas Berhad with recourse.
In the normal course of banking operations, the Group sells loans to Cagamas Berhad. The Group is liable in respect of the loans sold directly to Cagamas Berhad under the condition that the Group undertakes to administer the loans on behalf of Cagamas Berhad and to buy back any loans which are regarded as defective based on prudence. Such financing transactions and the obligation to buy back the loans are reflected as a
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL liability on the balance sheet.
15 PROVISION FOR TAXATION AND ZAKAT Group Company 2002 2002 2001 RM’000 RM’000 RM’000
Taxation 88,030 40 - Zakat 4,837 - -
92,867 40 -
16 LONG TERM BORROWINGS On 12 December 2002, the Company issued RM300 million nominal amount of secured fixed rate bonds, at a discount in three tranches as follows:
Tranche 1 5.25% RM50 million nominal value secured fixed rate 3 year bonds, maturing on 12 December 2005; and
Tranche 2 6.00% RM100 million nominal value secured fixed rate 5 year bonds, maturing on 12 December 2007; and
Tranche 3 6.75% RM150 million nominal value secured fixed rate 7 year bonds, maturing on 12 December 2009.
These bonds were rated at A2 by Rating Agency Malaysia Berhad (‘RAM’). 101
16 LONG TERM BORROWINGS (CONTINUED) The main features of these bonds are as follows:
(i) Each tranche of these bonds are represented by a Global Certificate to be deposited with Bank Negara Malaysia (‘BNM’) and will be traded under the Scripless Securities Trading System maintained by BNM;
(ii) The bonds are in the denominations of RM1 million each and in integral multiples of RM1 million; EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL (iii) The bonds bear interest at 5.25% (Tranche 1), 6.00% (Tranche 2) and 6.75% (Tranche 3) on the nominal value of the outstanding bonds, payable semi annually;
(iv) The bonds are constituted by a Trust Deed dated 25 November 2002 made between the Company and the Trustees, which are entrusted to act for the benefit of the bondholders;
(v) The bonds is secured against the Sinking Fund Accounts, solely operated and maintained by the Trustee;
(vi) The bonds will be redeemed by the Company at their nominal value on the maturity date of each tranche or puchased by tender or private treaty for cancellation; and
(vii) The bonds shall constitute direct, secured and unconditional obligations of the Company, ranking pari passu without any preference or priority amongst themselves and with all others present and future secured and unsubordinated obligations of the Company.
A2 rating is defined by RAM as being able to offer adequate degree of safety for timely repayment of interest and principal and more susceptible to changes in circumstances and economic conditions than debts in higher-rated categories. The subscript 2 in this category indicates a mid-ranking in the A category.
17 OTHER LIABILITIES Group Company 2002 2002 2001 RM’000 RM’000 RM’000
Deferred taxation (Note 29) 3,057 - - Other liabilities 201,497 706 11 Interest/dividend payable 167,577 976 - Provision for retirement benefits (note (i)) 4,261 - - Profit equalisation reserves 14,008 - -
390,400 1,682 11
(i) The maturity structure of provision for retirement benefits is as follows: Group 2002 RM’000
Within 1 year 508 Later than 1 year and not later than 5 years 1,378 Later than 5 years 2,375 102 notes to the financial statements { continued }
18 SHARE CAPITAL Group and Company 2002 2001 RM’000 RM’000
Ordinary shares of RM1 each
Authorised:
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Balance as at 1 January 100 100 Creation 1,999,900 -
Balance as at 31 December 2,000,000 100
Issued and fully paid: Balance as at 1 January -* -* Shares issued pursuant to rights issue (note (i)) 10 - Shares issued pursuant to KCHB Scheme of Arrangement (note (ii)) 94,788 - Shares issued pursuant to EBB Scheme of Arrangement (note (iii)) 598,411 -
Balance as at 31 December 693,209 -*
* denotes RM2
During the financial year, the issued and paid-up ordinary share capital of the Company was increased from RM2 to RM693,208,732 by the issue of 693,208,730 fully paid-up ordinary shares of RM1.00 each as a result of the following transactions:
(i) The Company issued and allotted 9,888 new ordinary shares of RM1 each at an issue price of RM1.20 per ordinary share in respect of Non Renounceable Rights Issue to finance the working capital of the Company;
(ii) Kedah Cement Holdings Berhad (‘KCHB’) Scheme of Arrangement
Pursuant to the KCHB Scheme of Arrangement between KCHB and its shareholders under Section 176 of the Companies Act, 1965, EON Capital Berhad (‘ECB’) allotted and issued 94,787,685 ordinary shares of RM1 each to the KCHB Minority Shareholders on the basis of one new ECB share for every one KCHB share originally held by the KCHB Minority Shareholders. The total cash consideration of RM216,683,488 for the issuance of ordinary shares was fully paid-up by Malayan Cement Berhad (‘MCB’); and
(iii) EON Bank Berhad (‘EBB’) Scheme of Arrangement
Pursuant to the EBB Scheme of Arrangement and Amalgamation between EBB and its shareholders under Section 176 of the Companies Act, 1965, EBB shares were transferred and vested in ECB for a total consideration of RM2,011,000,000. The total consideration were satisfied partly by issuance of 598,411,047 new ECB ordinary shares at an issue price of RM2.58 per ordinary share and the balance via cash consideration of RM467,099,444. The cash consideration was financed via issuance of RM300 million nominal value of secured fixed rate bonds, at a discount and proceeds from the payment made by MCB as mentioned in paragraph (ii) above. 103
18 SHARE CAPITAL (CONTINUED) The newly issued ordinary shares rank pari passu in all respects with the existing ordinary shares of the Company
With effect from 23 December 2002, the entire issued and paid-up ordinary share capital of the Company were listed and quoted on the Main Board of the Kuala Lumpur Stock Exchange. EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL 19 RESERVES The statutory reserve is maintained in compliance with Section 36 of the Banking and Financial Institutions Act, 1989 and is not distributable as cash dividends.
20 INTEREST INCOME Group Company 2002 2002 2001 RM’000 RM’000 RM’000
Loans and advances 125,266 - - Money at call and deposit placements with financial institutions 4,839 163 - Dealing securities 1,683 - - Investment securities 16,182 - -
147,970 163 - Accretion of discount less amortisation of premium 2,940 - - Net interest suspended ( 9,927 ) - -
140,983 163 -
21 INTEREST EXPENSE Group Company 2002 2002 2001 RM’000 RM’000 RM’000
Deposits and placements of banks and other financial institutions 14,869 - - Deposits from other customers 50,319 - - Long term borrowings 1,081 1,081 - Others 3,078 - -
69,347 1,081 - 104 notes to the financial statements { continued }
22 LOAN AND FINANCING LOSS AND PROVISION Group 2002 RM’000
Provision for bad and doubtful debts and financing: - specific provision (net) 3,365 - general provision ( 312 ) EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Bad debts and financing: - written-off 284 - recovered ( 695 )
2,642 Provision for amounts recoverable from Danaharta: - amount charged during the period 258
Total 2,900
23 NET LOSS FROM INVESTMENT SECURITIES Group 2002 RM’000
Net gain from sale of investment securities 11,549 Less: Provision for diminution in value of investment securities ( 17,873 )
( 6,324 )
24 OTHER INCOME Group 2002 RM’000
Foreign exchange gain: - realised 167 - unrealised 396 Rental income from premises 49 Gain on disposal of property, plant and equipment 721 Write back of provision for commitments and contingencies 95 Other non-operating income 5,677
7,105 105
25 OVERHEAD EXPENSES Group Company 2002 2002 2001 RM’000 RM’000 RM’000
Personnel costs 17,903 - - Establishment costs 12,652 - - Marketing expenses 4,248 - -
Administration and general expenses 12,545 383 11 2002 BERHAD • ANNUAL REPORT EON CAPITAL
47,348 383 11
The above expenditure includes the following statutory disclosures:
Directors’ remuneration (Note 26) 1,149 - - Rental of premises 2,216 - - Hire of equipment 320 - - Auditors’ remuneration 385 35 1 Depreciation of property, plant and equipment 2,483 - - Property, plant and equipment written off 1,572 - - Provision for retirement benefits 96 - - Pre-operating and preliminary expenses written off --8
26 DIRECTORS’ REMUNERATION Forms of remuneration in aggregate for all Directors charged against the profit for the financial year are as follows: Group Company 2002 2002 RM’000 RM’000
Non-Executive Directors: - Fees 1,026 - - Other remuneration 123 -
1,149 -
The estimated cash value of benefits-in-kind of Directors of the Group and the Company amounted to RM9,114 and RMNil respectively. 106 notes to the financial statements { continued }
27 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES
(a) Related parties and relationships The related parties of and their relationship (other than those disclosed in Note 10 to the financial statements) with the Group and the Company are as follows:
Related parties Relationship
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Edaran Otomobil Nasional Berhad (‘EON Berhad’) Ultimate holding company Other companies in EON Berhad Group Other related parties Other companies in the DRB-HICOM Berhad Group Other related parties Tan Sri Dato’ Seri Mohd Saleh bin Sulong Director of the Company Rin Kei Mei Director of the Company
(b) Significant related party transactions and balances In the normal course of the Group’s banking and finance business, a number of banking and financing transactions are entered into with related parties. These include loans, deposits and foreign currency transactions. These significant related party transactions were carried out on commercial terms and at market rates obtainable in transactions with unrelated parties unless otherwise stated.
Year ended 2002 Ultimate Other holding Subsidiary related company companies parties RM’000 RM’000 RM’000
Company
Income
Interest on money market lending - 163 -
Amount due from
Deposits and placements - 37,500 -
Group
Income
Interest on loans and advances - - 912
Expenditure
Interest on deposits and placements 437 - 985 Other expenses 1,289 - - 107
27 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
(b) Significant related party transactions and balances (continued)
Year ended 2002 Ultimate Other holding Subsidiary related company companies parties RM’000 RM’000 RM’000 EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Group
Amount due from
Loans and advances - - 74,240
Amount due to
Current accounts 1,144 - 60,834 Savings deposits - - 10,346 Fixed deposits 225,022 - 551,519 Inter-bank placements 30,000 - - Others 550 - 6,450
Included in the ‘Other related parties’ are transactions and balances with the abovementioned Directors or with companies in which these Directors are deemed to have substantial interests.
Transactions with other related parties are aggregated because these transactions are similar in nature and no single transaction with these parties is significant enough to warrant separate disclosure.
In addition to the significant related party disclosures mentioned above, set out below are other significant related party transactions transacted in the normal course of business and carried out on terms and conditions obtainable in transactions with unrelated parties, other than those related to the Group’s banking and finance business.
Group 2002 RM’000
Rental of office space payable to CCL (Cyclecarri) Properties Sdn Bhd 1,319 108 notes to the financial statements { continued }
28 TAXATION Group Company 2002 2002 2001 RM’000 RM’000 RM’000
Malaysian income tax: - Current year 12,695 40 -
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Transfer to deferred taxation 497 - -
13,192 40 -
Company The effective tax rate of the Company for the financial year was higher than the statutory tax rate because certain expenses were not deductible for tax purposes.
Group The effective tax rate of the Group for the financial year was higher than the statutory tax rate because certain expenses were not deductible for tax purposes.
As at the balance sheet date, the merchant bank subsidiary has unutilised tax losses of approximately RM100,022,000 available for carry forward to offset against its future taxable income, subject to the provisions of the tax legislations and agreements with the tax authorities.
29 DEFERRED TAXATION Group 2002 RM’000
Balance as at 1 January - Arising from acquisition of subsidiary companies 2,560 Transfer from income statement 497
Balance as at 31 December 3,057
The deferred taxation is in respect of the following:
Timing differences between depreciation and corresponding capital allowances on property, plant and equipment 37,404 Amortisation of premium less accretion of discount ( 8,900 ) Other timing differences ( 17,586 )
10,918
Deferred tax liabilities at 28% 3,057 109
29 DEFERRED TAXATION (CONTINUED) Timing differences and unutilised tax losses in respect of deferred tax benefits not accounted for in the financial statements are as follows: Group 2002 RM’000
Net tax effects of these timing differences and unutilised tax losses: EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Current year - net debit 150 At year end - net debit 134,878
30 EARNINGS PER SHARE
(a) Basic earnings per share The basic earnings per share is calculated by dividing the net profit for the financial year by the weighted average number of ordinary shares of RM1 each in issue during the financial year.
Group 2002
Net profit for the financial year (RM’000) 23,748
Weighted average number of ordinary shares in issue (‘000) 57,770
Basic earnings per share (sen) 41.1
(b) Diluted earnings per share For the diluted earnings per share, the weighted average number of ordinary shares of RM1 each in issue is adjusted to assume conversion of all dilutive potential ordinary shares.
As at 31 December 2002, there was no dilutive potential ordinary shares outstanding.
31 COMMITMENTS AND CONTINGENCIES In the normal course of the Group’s banking and finance business, the banking and finance subsidiary companies make various commitments and incurs certain contingent liabilities with legal recourse to their customers. No material losses are anticipated as a result of these transactions.
Nature of commitments and contingencies
Direct credit substitutes comprise of guarantees undertaken by the Group to support the financial obligations of their customers to third parties.
Certain transactions related contingent items represent financial products whose crystallisations are dependent on specific events other than default payment by the customers. They include performance related contingencies and standby letter of credit. 110 notes to the financial statements { continued }
31 COMMITMENTS AND CONTINGENCIES (CONTINUED)
Nature of commitments and contingencies (continued)
Short term self liquidating trade-related contingencies relate to bills of exchange which have been endorsed by the Group and represent liabilities in the event of default by the acceptor and the drawer of the bill.
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Obligations under underwriting agreements arise from underwriting agreements relating to the issue of equity and debts securities, where the Group is obliged to subscribe or purchase the securities in the event the securities are not taken up when issued.
Irrevocable commitments to extend credit include all obligations on the part of the Group to provide funding facilities or the undrawn portion of an approved credit facilities to customers.
Forward foreign exchange contracts are agreements to buy or sell fixed amounts of currency at agreed rates of exchange on a specified future date.
Risk Weighted Exposures of the Group as at 31 December: Group 2002 Credit Principal equivalent amount amount* RM’000 RM’000
Direct credit substitutes 367,668 367,668 Certain transaction related contingent items 433,477 216,739 Short term self liquidating trade-related contingencies 145,343 29,069 Obligations under underwriting agreements 494,000 247,000 Irrevocable commitments to extend credit: - maturity exceeding one year 1,873,989 936,994 - maturity not exceeding one year 4,055,722 - Foreign exchange related contracts - less than one year 1,538,018 19,463 Miscellaneous 366,655 -
Total 9,274,872 1,816,933
* The credit equivalent amount is arrived at using the credit conversion factor as per Bank Negara Malaysia guidelines. 111
31 COMMITMENTS AND CONTINGENCIES (CONTINUED) Foreign exchange related contracts are subject to market risk and credit risk. There are no interest rate, equity and commodity related contracts as at 31 December 2002.
Market risk Market risk is the potential change in value caused by movement in market rates or prices. The contractual amounts stated above provide only a measure of involvement in these types of transactions and do not
represent the amounts subject to market risk. Exposure to market risk may be reduced through offsetting 2002 BERHAD • ANNUAL REPORT EON CAPITAL on and off-balance sheet positions. As at 31 December 2002, the amount of contracts of the Group which were not hedged and, hence, exposed to market risk was RM4,852,080.
Credit risk Credit risk arises from the possibility that a counterparty may be unable to meet the terms of a contract in which the Group has a gain position. As at 31 December 2002, the amount of credit risk of the Group, measured in term of the cost to replace the profitable contracts, was RM3,218,403. This amount will increase or decrease over the life of the contracts, mainly as a function of maturity dates and market rates or prices.
32 CAPITAL COMMITMENTS Group 2002 RM’000
Capital expenditure not provided for in the financial statements are as follows:
Property, plant and equipment
- Authorised and contracted for 26,765 - Authorised but not contracted for 9,210
35,975 112 notes to the financial statements { continued }
33 LEASE COMMITMENTS The Group has lease commitments in respect of rented premises and equipment on hire, all of which are classified as operating leases. A summary of the non-cancellable long-term commitments, net of sub- leases is as follows: Group 2002 RM’000
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Year
Within 1 year 3,370 Later than 1 year and not later than 5 years 3,072 Later than 5 years 28,843
34 FAIR VALUE OF FINANCIAL INSTRUMENTS Financial instruments comprise financial assets, financial liabilities and off-balance sheet financial instruments. Fair value is the amount at which a financial asset could be exchanged or a financial liability settled, between knowledgeable and willing parties in an arm’s length transaction. The information presented herein represents the estimates of fair values as at the balance sheet date.
Where available, quoted and observable market prices are used as the measure of fair values. Where such quoted and observable market prices are not available, fair values are estimated based on a range of methodologies and assumptions regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows and other factors. Changes in the uncertainties and assumptions could materially affect these estimates and the resulting fair value estimates.
In addition, fair value information for non-financial assets and liabilities are excluded, as they do not fall within the scope of MASB 24, which requires the fair value information to be disclosed. These include property, plant and equipment, investment in subsidiaries and associated companies and intangibles. 113
34 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) A range of methodologies and assumptions had been used in deriving the fair values of the Group’s financial instruments at balance sheet date. The total fair value of each financial instrument is not materially different from the total carrying value, except for the following financial assets and liabilities:
Group Carrying Fair value value RM’000 RM’000 EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL On-balance sheet items
Financial assets
Dealing securities 954,842 981,894 Investment securities 4,357,813 4,371,776 Loans, advances and financing 20,573,665 21,753,185
Financial liabilities
Deposits from customers 18,523,416 18,814,747 Deposits and placements of banks and other financial institutions 7,262,140 6,707,293 Amounts due to Cagamas Berhad 841,981 887,188
Off-balance sheet items The derivative financial instruments become favourable (assets) or unfavourable (liabilities) as a result of fluctuation in market interest rates or foreign exchange rates relative to their terms. The extent to which instruments are favourable or unfavourable and the aggregate fair values of derivative financial assets and liabilities can fluctuate significantly from time to time.
The fair values of derivative financial instruments at the balance sheet date are as follows:
Group Underlying Year-end Year-end notional positive negative amount fair value fair value RM’000 RM’000 RM’000
Foreign exchange related contracts: - Forward contracts 1,538,018 3,218 2,659
Pursuant to the transitional provisions of MASB 24, the information on the fair values of financial instruments as at 31 December 2001 is not presented. 114 notes to the financial statements { continued }
34 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) The estimated fair values are derived using the following methodologies and assumptions:
Cash and short term funds The fair value of cash and short term funds approximate their carrying value.
Deposits and placements with financial institutions
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL For deposits and placements with financial institutions with maturities of less than three months, the carrying value is a reasonable estimate of fair value.
For deposits and placements with maturities three months and above, estimated fair value is based on discounted cash flows using prevailing money market interest rates at which similar deposits and placements would be made with financial institutions of similar credit risk and remaining period to maturity.
Dealing and investment securities The estimated fair value is generally based on quoted and observable market prices. Where there is no ready market in certain securities, fair values have been assessed by reference to market indicative interest yields or net tangible asset backing of the investee.
Loans, advances and financing For floating rate loans, the carrying value is generally a reasonable estimate of fair value.
For fixed rate loans, the fair value is estimated by discounting the estimated future cash flows using the prevailing market rates of loans with similar credit risks and maturities.
The fair values of impaired floating and fixed rate loans are represented by their carrying value, net of specific provision and interest-in-suspense/income-in-suspense, being the expected recoverable amount.
Deposits from customers For deposits from customers with maturities of less than three months, the carrying amounts are reasonable estimates of their fair value.
For deposit with maturities of three months or more, fair values are estimated using discounted cash flows based on prevailing market rates for similar deposits from customers.
Deposits and placements of banks and other financial institutions The estimated fair values of deposits and placements of banks and other financial institutions with maturities of less than three months approximate their carrying values.
For deposits and placements with maturities three months or more, the fair values are estimated based on discounted cash flows using prevailing money market interest rates for deposits and placements with similar remaining period to maturities. 115
34 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Obligations on securities sold under repurchase agreements The fair values of obligations on securities sold under repurchase agreements approximate their carrying values.
Bills and acceptances payable
The fair values of bills and acceptances payable approximate their carrying values. 2002 BERHAD • ANNUAL REPORT EON CAPITAL
Amounts due to Cagamas Berhad The estimated fair value for Amounts due to Cagamas Berhad is based on discounted cash flows using the prevailing interest rates offered by Cagamas Berhad for hire-purchase and housing loans sold to Cagamas Berhad with similar remaining period to maturities.
Long term borrowings The estimated fair values are estimated based on discounted cash flows using a discounted rate based upon the borrowing rate which the Directors expect would be available to the Group at the balance sheet date.
Other assets and liabilities The carrying value less any estimated allowance for financial assets and liabilities included in ‘Other assets and liabilities’ are assumed to approximate their fair values as these items are not materially sensitive to the shift in market interest rates.
Foreign exchange related contracts The fair values of foreign exchange rate related contracts are the estimated amounts the Group would receive or pay to terminate the contracts at the balance sheet date. 116 notes to the financial statements { continued }
35 ACQUISITION OF SUBSIDIARY COMPANIES On 2 December 2002, EON Bank Berhad (‘EBB’) and its subsidiary companies became wholly-owned subsidiaries of EON Capital Berhad (‘ECB’) pursuant to the EBB Scheme of Arrangement and Amalgamation between EBB and its shareholder under Section 176 of the Companies Act, 1965, for a total purchase consideration of RM2,011,000,000. The total consideration was satisfied partly by issuance of 598,411,047 ECB ordinary shares at an issue price of RM2.58 per ordinary share and the balance via cash consideration of RM467,099,444. EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Details of net assets acquired, reserve arising on consolidation and cash flow arising from the acquisition are as follows: At date of acquisition RM’000
Cash and short-term funds 1,977,788 Deposits and placements with financial institutions 341,000 Dealing securities 938,730 Investment securities 3,904,035 Loans, advances and financing 20,584,613 Statutory deposits with Bank Negara Malaysia 896,077 Other assets 815,012 Property, plant and equipment 157,228 Deposits from customers ( 17,884,580 ) Deposits and placements of banks and other financial institutions ( 7,218,065 ) Obligations on securities sold under repurchase agreements ( 854,275 ) Bills and acceptances payable ( 227,822 ) Amounts due to Cagamas Berhad ( 855,426 ) Provision for taxation and zakat ( 88,373 ) Other liabilities ( 408,776 )
Net assets acquired at the date of acquisition 2,077,166
Reserve arising on consolidation ( 66,166 )
Total purchase consideration 2,011,000
Less: Purchase consideration satisfied by share issued ( 1,543,901 )
Purchase consideration discharged by cash 467,099
Less: Cash and cash equivalents in subsidiary companies acquired ( 1,977,788 )
Net cash inflow on acquisition of subsidiary companies ( 1,510,689 ) 117
35 ACQUISITION OF SUBSIDIARY COMPANIES (CONTINUED) The effect of this acquisition on the financial results of the Group during the financial year ended 31 December 2002 is as follows: Group 2002 RM’000
Interest income 140,983
Interest expense ( 68,266 ) 2002 BERHAD • ANNUAL REPORT EON CAPITAL
Net interest income 72,717 Income from Islamic Banking 8,200
80,917 Loan and financing loss and provision ( 2,900 ) Profit equalisation reserves ( 2,364 )
75,653 Fee and commission income 8,664 Net loss from investment securities ( 6,324 ) Net gain from dealing securities 490 Dividend income 109 Other income 7,105
Net income 85,697 Overhead expenses ( 46,965 )
Profit before taxation and zakat 38,732
Taxation ( 13,152 ) Zakat ( 328 )
Increase in Group’s net profit for the financial year 25,252 118 notes to the financial statements { continued }
35 ACQUISITION OF SUBSIDIARY COMPANIES (CONTINUED) The effect of this acquisition on the financial position of the Group as at 31 December 2002 is as follows: Group 2002 RM’000
Cash and short-term funds 2,221,890 Deposits and placements with financial institutions 393,000
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Dealing securities 954,842 Investment securities 4,357,813 Loans, advances and financing 20,573,665 Other assets 1,047,260 Statutory deposits with Bank Negara Malaysia 865,213 Property, plant and equipment 159,114 Deposits from customers ( 18,523,416 ) Deposits and placements of banks and other financial institutions ( 7,262,140 ) Obligations on securities sold under repurchase agreements ( 1,168,396 ) Bills and acceptances payable ( 155,565 ) Amounts due to Cagamas Berhad ( 841,980 ) Provision for taxation and zakat ( 93,324 ) Other liabilities ( 388,221 )
Increase in Group’s net assets 2,139,755
36 SEGMENTAL REPORTING The Group can be divided into four major business lines, i.e. Enterprise Banking, Individual Banking, Islamic Banking and Treasury and Investment Banking. The business lines are the basis on which the Group reports its primary segment information.
Enterprise Banking focuses on providing a full range of commercial banking products to small and medium sized enterprises and corporate clients.
Individual Banking provides a complete selection of banking products and services to individual customers of the Group.
Islamic Banking focuses on providing a full range of commercial banking products and services based on Islamic principles to individual customers, small and medium sized customers and corporate clients.
Treasury and Investment Banking is involved in the fund management of the Group and in proprietary trading in treasury related products and services. It is also involved in providing services to corporate clients and financial institutions in relation to structured financing, origination and distribution of debt and equity capital market products, mergers and acquisitions, debt restructurings, corporate advisory, Islamic capital market products and project advisory. 119
36 SEGMENTAL REPORTING (CONTINUED) Treasury and Enterprise Individual Islamic Investment Banking Banking Banking Banking Total RM’000 RM’000 RM’000 RM’000 RM’000
Group
Gross operating revenue (1) 60,517 92,478 16,953 17,874 187,822 2002 BERHAD • ANNUAL REPORT EON CAPITAL Less: Inter-segment revenue (2) ( 91 ) ( 1,639 ) - ( 238 ) ( 1,968 )
60,426 90,839 16,953 17,636 185,854
Segment results 22,590 16,860 ( 3,526 ) 3,508 39,432 Unallocated costs ( 2,164 )
Profit before taxation and zakat 37,268 Taxation and zakat ( 13,520 )
Net profit for the financial year 23,748
Note:
(1) Gross operating revenue comprised gross interest income received from loans, advances and financing (net of interest/income suspended), dealing securities, investment securities (net of accretion of discount less amortisation of premium) and inter-bank placements and deposits, fee income, realised gains or loss from dealing and investment securities, gross income received from Islamic Banking and other operating revenue.
(2) Inter-segment transactions are carried out on commercial terms at market rates obtainable in transactions with unrelated parties.
(3) There are no comparative figures for the group segmental reporting as the Company was previously dormant and acquired EON Bank group in the current financial year. 120 notes to the financial statements { continued }
36 SEGMENTAL REPORTING (CONTINUED) Treasury and Enterprise Individual Islamic Investment Banking Banking Banking Banking Total RM’000 RM’000 RM’000 RM’000 RM’000
Group
EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL Segment assets 9,090,150 14,475,017 2,869,908 3,215,587 29,650,662
Unallocated assets 922,135
Total assets 30,572,797
Segment liabilities 8,397,143 14,043,758 2,602,393 3,085,806 28,129,100
Unallocated liabilities 594,145
Total liabilities 28,723,245
Other segment information:
Capital expenditure 1,784 3,333 595 1,725 7,437 Depreciation of property, plant and equipment 568 1,132 189 594 2,483 Other non-cash expenses 13,415 29,698 7,626 2,841 53,580 121
36 SEGMENTAL REPORTING (CONTINUED) The reconciliation for total segments gross operating revenue to the net income of the consolidated income statement is as follows:
Financial year ended 31.12.2002 RM’000
Total segments gross operating revenue 185,854 2002 BERHAD • ANNUAL REPORT EON CAPITAL (of which: Gross operating revenue from Islamic Banking of RM16,953,000) Less: Interest expense ( 78,101 ) (of which: Dividend expense from Islamic Banking of RM8,753,000) Loan and financing loss and provision ( 2,900 ) Profit equalisation reserves ( 2,364 ) Provision for diminution in value of investment securities ( 17,873 )
Net income 84,616
The Group’s activities are predominantly carried out in Malaysia, with the Malaysian market contributing 99% of gross operating revenue. Accordingly, no information on the Group’s operations by geographical segments has been provided.
37 SIGNIFICANT EVENT SUBSEQUENT TO THE BALANCE SHEET DATE On 1 January 2003, the entire credit portfolio of its merchant bank subsidiary, Malaysian International Merchant Bankers Berhad, had been transferred to its commercial bank subsidiary, EON Bank Berhad, in accordance with the Vesting Order obtained from the High Court.
38 COMPARATIVE FIGURES There are no comparative figures for the Group’s financial statements as this is the first year the Group prepared its consolidated financial statements. 122 EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL proxy form 123 (454644-K)
I/WE of being a member of EON CAPITAL BERHAD, hereby appoint of or failing him/her EON CAPITAL BERHAD • ANNUAL REPORT 2002 BERHAD • ANNUAL REPORT EON CAPITAL of as my/our proxy to vote for me/us on my/our behalf at the Fifth Annual General Meeting of the Company to be held at Nirwana Ballroom 1, Lower Lobby, Mutiara Hotel, Jalan Sultan Ismail, 50718 Kuala Lumpur on Monday, 26 May 2003 at 12.00 noon and at any adjournment thereof, as indicated below:
NO. RESOLUTIONS FOR AGAINST
1. To receive and adopt the Reports of the Directors and Auditors and the Audited Financial Statements for the year ended 31 December 2002.
2. To re-elect Y. Bhg. Tan Sri Dato’ Seri Mohd Saleh bin Sulong as a Director pursuant to Article 102 of the Company’s Articles of Association.
3. To re-elect Y. Bhg. Datin Dr. Umikalsum binti Mohd Noh as a Director pursuant to Article 102 of the Company’s Articles of Association.
4. To re-elect Mr. Rin Kei Mei as a Director pursuant to Article 102 of the Company’s Articles of Association.
5. To re-elect Y. Bhg. Dato’ Maznah binti Abdul Jalil as a Director pursuant to Article 102 of the Company’s Articles of Association.
6. To re-elect Dr. Tiong Ik King as a Director pursuant to Article 102 of the Company’s Articles of Association.
7. To re-elect Mr. Wizayaratnam Somasundram as a Director pursuant to Article 102 of the Company’s Articles of Association.
8. To re-appoint Messrs. PricewaterhouseCoopers as Auditors and to authorise the Directors to fix their remuneration.
Please indicate with an “X” in the spaces above on how you wish your vote to be cast. In the absence to specific directions, your proxy will vote or abstain as he/she thinks fit.
Dated this day of Signature of Shareholder NOTES: 1. A member entitled to attend the meeting may appoint a proxy who may but need not be a member of the Company. The provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. 2. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 12th Floor, Wisma Cyclecarri, 288, Jalan Raja Laut, 50350 Kuala Lumpur not less than 48 hours before the time appointed for holding the meeting. 3. If the member is a corporation, the proxy form should be executed under its Common Seal or under the hand of an officer or attorney duly authorised.